Gold Holds $1,600 as Currency Wars and Demand Remain in Focus

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On Tuesday, gold (NYSEARCA:GLD) futures for April delivery, the most active contract, fell $5.30 to settle at $1,601.10 per ounce, while silver (NYSEARCA:SLV) futures for March dropped 43 cents to close at $29.42. It was the lowest close for gold in more than six months.

Both precious metals traded in the red, despite more chatter of currency wars and a recent report on global gold demand. Central banks around the world have injected trillions of dollars into the financial system over the past few years, but the finance minsters and central bankers attending the Group of 20 nations meeting in Moscow mostly ignored the monetary actions as an act of currency war.

In a statement released over the weekend, the G-20 members simply pledged to “refrain from competitive devaluation” and pursue monetary policies to achieve “domestic price stability.”

Meanwhile, total gold demand in the fourth quarter reached 1,195.9 tonnes, the highest fourth quarter total on record and the best quarterly haul behind the third quarter of 2011, according to the latest report from the World Gold Council. Total demand for the entire year slipped 4 percent to 4,405.5 tonnes, but with a value of $236.4 billion, it was an all-time record in dollar terms. In the bigger picture, annual gold demand was 15 percent higher than the average for the previous five years.

In afternoon trading, the SPDR Gold Trust (NYSEARCA:GLD) declined 0.25 percent, while the iShares Silver Trust (NYSEARCA:SLV) dropped 1.25 percent. Gold miners (NYSEARCA:GDX) such as Newmont Mining (NYSE:NEM) and Barrick Gold (NYSE:ABX) fell 0.80 percent and 0.30 percent, respectively. Silver names such as Hecla Mining (NYSE:HL) and First Majestic Silver (NYSE:AG) declined 2.10 percent and 1.35 percent, respectively.

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Disclosure: Long EXK, AG, HL, PHYS

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