Goldman Sachs Sinks Gold Prices
NEW YORK (
) --
Friday were dropping steeply as investors traded out of riskier assets like gold and into the U.S. dollar.
Gold Prices Nose Dive
Gold for June delivery was slipping $22.10 to $1,138.20 an ounce at the Comex division of the New York Mercantile Exchange. The gold price Friday has traded as high as $1,161.20 and $1,130 after settling just above $1,160 on Thursday. The
was adding 0.44% to $80.79 as the euro fell 0.67% against the dollar. The spot gold price Friday was falling over $20, according to Kitco's gold index.
The news that the SEC charged
Goldman Sachs
with fraud was killing gold prices as investors rotated out of riskier commodities and into safer assets like the U.S. dollar. The gold price had been finding support around $1,150 an ounce after better-than-expected earnings from big U.S. companies. But gold couldn't hold that level and is now retesting the $1,135 area as momentum buying erodes.
"I saw a breakout here
but we have a pretty strong down move in gold and silver this morning and it's a bit concerning," says David Morgan, founder of
Silver-Investor.com
. "The way it was set up at the $1,155 level it looked pretty strong to the upside ... I am going to let the market tell me. I'm not going to over-eat yet but I'm not happy with what I'm seeing right now."
Over the short term, gold will keep looking to the dollar/euro relationship for direction. After meeting with officials from the European Union and the International Monetary Fund, Greece is expected by many investors to formally ask for its financial bailout money.
Greece
is struggling to raise money on its own and must currently pay a 7.22% yield on 10-year bonds as it tries to sweeten the pot for investors to lend the country money. Steep borrowing costs highlight the lack of investor confidence in the Greek economy despite the country's recent tax hikes. Portugal could be the next eurozone country on the chopping block with yields for its 10-year bonds hitting a high of 4.5%. Its suffering export business is also hampering the country's ability to turn to trade to make money.
These persistent debt fears are leading investors to dump the euro for the safety of the U.S. dollar. As the dollar grows stronger, gold weakens as the commodity becomes more expensive to buy in other currencies. Investor interest in the
SPDR Gold Shares
(GLD) - Get Report
, the most popular physically-backed ETF, has leveled off this week. Tonnage has remained at 1,141.04 since last Friday after the ETF added almost 10 tons in one day. Investors are holding on to their gold positions, but not adding to them either, which could crimp momentum for gold and keep prices in a tight trading range. Shares of the GLD were falling over 2% to $111.39. Paulson & Co., which has been brought up in association with Goldman Sachs' fraud charges, is also the largest holder of the GLD. Although no charges were brought against the hedge fund, the negative sentiment could also be weighing on gold prices.
The
was down 71 cents to $17.71 while copper prices were losing 7 cents to $3.52.
Mining stocks, a more leveraged way to
, were mixed along with other stocks.
Barrick Gold
(ABX)
was slipping 2.30% to $38.92 while
Newmont Mining
(NEM) - Get Report
was trading lower at $51.69. Other large-cap miners
Kinross Gold
(KGC) - Get Report
and
Goldcorp
(GG)
were down more than 2% at $17.53 and $38.88, respectively.
Shares of
Freeport McMoRan Copper & Gold
(FCX) - Get Report
were losing 2.74% to $81.73 and
Yamana Gold
(AUY) - Get Report
was down more than 1% to $10.03.
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--
Written by Alix Steel in New York
.
Alix joined TheStreet.com TV in February 2007. Previously, she held positions in film and theater production, management, and legal administration. Alix has a degree in communications and theater from Northwestern University.