NEW YORK ( TheStreet ) -- Gold prices were tumbling Thursday as investors dumped the metal in favor of cash, as uncertainty swirled and pressure mounted for Europe to find a solution for Greece, bondholders and banks.
Gold for December delivery was losing $27.70 at $1,619.30 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,646.50 and as low as $1,607.90 an ounce while the spot gold price was down $22, according to Kitco's gold index.
The entire commodity space was under pressure Thursday with investors raising cash and putting some money to work in equities."Precious metals will see weakness as traders and investors look to maintain liquidity levels and cover margin requirements," says James Moore, research analyst at FastMarkets.com. Moore contends that if Europe stumbles here and bondholders are forced to take a big loss and liquidity tightens in the region then gold could sell off further, perhaps testing the $1,533 an ounce level.
Despite day-to-day volatility, at the core of the gold market is confusion. Experts are finding it hard to produce a reason for gold's recent price action. The metal has been moving with the stock market as investors feel better about buying assets. The metal has been moving inversely to the U.S. dollar and with the euro therefore intimately tied to headlines out of Europe. Both of these patterns seem to have evaporated today. "The obvious suspects are not holding up," says Philip Klapwiijk, Global Head of Metals Analytics at GFMS an independent research consultancy owned by Thomson Reuters. Recent price action "suggests some bailing out going on." Also not helping is the massive confusion headed into Sunday's European Commission meeting where the pressure mounts for leaders to provide clarity and a quick solution to save Greece, bondholders and banks. French President Sarkozy reportedly initated an emergency meeting with German Chancellor Merkel about the firepower of the bailout fund and how best to use its available 440 billion euros. The two leaders also disagree on the loss bondholders should take on Greek bonds -- Merkel wanting a steep haircut to save Germany the expense of having to pony up more cash and Sarkozy wanting more moderate losses to protect its nation's banks, which have heavy exposure. The murky outlook has become a negative for gold. Typically gold would shine in this environment as a safe haven, but it seems like investors prefer to sell the asset. "If you look at the volatility in the market of late ... $20 moves in a day are not that
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