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Gold News: Monthly Review February 2012

Gold Consolidates above $1700 as Greece signs up to austerity and US growth continues

With US economic news seen as more positive for stocks as the month opened, gold struggled to maintain its early year momentum, though doveish comments from the US Fed Chairman, Bernanke, sandwiching the trading month has helped sentiment for the medium term outlook for gold in a thin market.

Bernanke has reiterated that problems in the US economy remain, and that the Fed sees danger from the European sovereign debt situation existing for some time to come. He also cited a stubbornly high unemployment rate as problematic for the US economy.

Resolutions, problems, and resolutions in regard to the Greek debt and bailout package have been the main focus of attention through the month, and helped to pull gold back and forth in a tight range. The deal with its private creditors – who will be forced to accept losses on their Greek bonds of up to 70% – finally forced the European Union to agree to the release of the €130 billion bailout in time for debt default to be avoided. The ECB also has leant a further €450 billion in 3 year 1% loans to Europe’s banks, hoping to stave off problems caused by Greece’s agreements.

However, the European Union has now downgraded its growth forecasts for Europe, where it now expects the Eurozone countries to move into a mild recession through 2012. This could cause further problems in debt-laden nations, and the respite for further angst may prove temporary.

The Greek deal, and better than expected economic releases from the Untied States, combined with a firming oil price – where Middle East tensions are rising once more – to help gold post a modest gain on the month.

The gold price seems to be attempting a consolidation above $1700, which many market observers see as bullish for the yellow metal in the longer term. However, it still remains vulnerable to short term shocks and profit taking if volume remain thin. Gold closed the month at $1770, a rise of 1.5% on January’s closing level.

With industrial activity picking up in the United States, silver and platinum both performed more strongly than gold in February. Silver picked up over 4% to end February at $37.23, whilst platinum pushed higher by 6.23% to $1726.

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