Gold, Silver Prices Take a Breather

Gold for August delivery was losing $1.30 to $1,527.90 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,534.90 and as low as $1,524.20 while the spot gold price was down 60 cents, according to Kitco's gold index.

Silver prices were up 16 cents to $36.08 an ounce while the U.S. dollar index was adding 0.51% at $75.41 and the euro was down 0.42% against the dollar.


Despite a stronger U.S. dollar, better-than-expected June same-store sales and stronger U.S. employment data, gold and silver prices were holding onto recent gains. The safe haven metals shrugged off a 25 basis point rate hike from the European Central Bank and the People's Bank of China. Typically when countries take steps to raise rates and tame inflation, gold and silver become less attractive as safe haven assets as the local currency is beefed up.

Gold and silver have been bucking this trend, as investors believe the rate hikes in Europe and China won't have a significant impact on inflation. Speculation is that inflation in China could rise to 6.2% in June, which would mean interest rates are still negative 2.7%.

Gold and silver are attractive in negative interest rate environments as the value of cash is eroded, which makes the metals a safer place to store wealth. The Bank of England left rates unchanged at 0.5% at its meeting Thursday despite the fact that prices rose 4.5% in May.

Gold prices have risen $46 this week on persistent Eurozone sovereign debt fears, the latest rally driven by a Moody's downgrade of Portuguese debt to junk. Some investors are using the two-day climb to take profits in gold but James Moore, research analyst at FastMarkets.com says "the return of Eurozone debt concerns and improved technical picture will lend further support the both gold and silver in the coming sessions," which is providing a floor of support for prices. (kitco.com)