Spanish Fallout & Positive Housing Data

Gold has turned negative in midday trading as the fallout over downgraded Spanish ratings added strength to the U.S.A. dollar.  A strengthening dollar drives down the demand for dollar-denominated commodities, including gold.  “Gold has a swift and negative reaction to the U.S. dollar firming up in the middle of the trading session along with weaker oil prices,” said Jeff Wright at Global Hunter Securities. “All of this is in reaction to news of a downgrade by Egan-Jones in the credit rating of Spain; we view Spain as the best line of defense to save the euro zone and have already factored Greece defaulting on their debts and exiting the euro this summer.“

Also adding pressure to gold prices is the rising U.S.A. stock market.  The S&P 500 is up again on housing data.  “We’re definitely seeing signs of stabilization on the housing front,” said Brad Sorensen, at Charles Schwab Corp. “The economy is looking decent. There’s also a bit of relief that we won’t have any imminent kicking out or defaulting of Greece.” There also appears to be a shift from stock repurchase to business investment during April and May. “Investors and corporations themselves are best served when the cash is applied to improving capital investment, as opposed to buying stock back,” said Bruce Bittles of Robert W. Baird & Co.. “That would be much more bullish.”

At 1:00 p.m. (EDT) – the APMEX precious metals spot prices were:

  • Gold – $1,559.10 – Down $11.60.
  • Silver – $27.96 – Down $0.53.
  • Platinum – $1,432.00 –Up $3.50.
  • Palladium – $605.00 –Up $13.10.
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