The price of gold backtracked on Monday as Spanish debt offset relief delivered by Sunday elections in Greece, The Wall Street Journal reports
As the sovereign debt crisis continues its relentless appetite for the banks, markets and public finance systems of euro zone nations, the yellowish metal was ebbing and flowing. Bullion, and the shared currency of the European Union, benefited from Aegean nation voters casting ballots for the political party that is working to ensure Greece remains among the 17-nation bloc.
But bond yields in Spain soared higher than 7 percent, marking the first time that metric has climbed that high since the monetary unit first appeared on the market. Greece, Ireland and Portugal each solicited international bailout aid when their bond yields exceeded 7 percent. The nation is waiting on disbursal of 100 billion in euros from the European Union and its partners to stabilize its hobbled banks.
But concerns are gaining momentum that the banks' fiscal issues cannot be solved by that figure.
"The underlying problems facing the euro zone are still very much present," metals analyst Marc Ground with Standard Bank told The Wall Street Journal.
At 2:01 p.m. on Monday, the price of gold increased 0.12 percent, a $2 lift to $1,630.10 per troy ounce.
The sovereign debt crisis, ongoing for well more than 24 months, has been burdening the euro, which the price of gold typically tracks. By contrast, the U.S. dollar gains in value as gold and the euro slump.
Prior to Sunday's election in Greece, the investors and traders abandoned the euro and the precious metal, instead preferring to devote interest to the world's reserve currency.
But, at the same time, this week represents the possibility that the U.S. dollar might be watered down.
The policy-making arm of the U.S. Federal Reserve, the Federal Open Market Committee, is slated to convene two days of meetings this week. Beginning Tuesday, the economic officials are likely to ponder whether additional strategies of spurring the globe's largest economy are pertinent at this juncture. Thus far, there have been two rounds of quantitative easing.
One Investment house speculated as to the central bank's next move.
Additional intervention is possibly going to be "a short-term extension of Operation Twist as the most likely outcome, which would give the Fed a few more months to sort out whether the recent softness in data is mainly payback for the warm winter weather, or a more prolonged slowdown," states a note penned by analysts with Barclays, according to The Wall Street Journal.
But several great unknowns lay ahead, Reuters reports
Questions are following the FOMC, which is likely to prompt a bounce one way or the other for the yellowish metal, one analyst told the news source.
"The fact that risk appetite has not rebounded more decisively after the Greek elections may suggest that the markets will push for a broader solution for the euro zone, one that would remove the contagion risk from Spain and Italy in particular," analyst Anne-Laure Tremblay with BNP Paribas told the news source. "Gold seems to be waiting for the Fed meeting on Wednesday. It is more sensitive to central bank action than to variations in risk appetite."
The stimulus issued by the FOMC following this week's meetings could very well be Operation Twist, according to