Industry News

Gold gains as euro appreciates amid strong economic data and IMF pledge

The price of gold rose on December 20 as the 17-nation euro rose in value amid the release of strong economic data in both Germany and the United States and news that Europe made a pledge to the International Monetary Fund (IMF) to help alleviate regional debt problems. Gold mining stocks might be buoyed by this uptick in the price of the physical metal.

February gold futures closed up $19.50 at $1,616.20 per ounce on the Comex division of the New York Mercantile Exchange, Kitco News reports. Gold was trading at $1,613.50 in London, up from $1,598.00. Spot gold was most recently $20.30 per ounce higher at $1,614.75. Prices for this contract are less than $10 away from their 200-day moving average of $1,621 per ounce, according to Reuters.

"The afternoon rally in risky assets and gold seems to have been spurred by better-than-expected U.S. housing data, which in turn further pushed the U.S. dollar lower," BNP Paribas analyst Anne-Laure Tremblay told the media outlet. "The rebound in the gold price could prompt some short-covering, and we could retest the 200-day moving average in the coming days."

The euro increased by as much as 1 percent versus the U.S. dollar, according to Bloomberg. This appreciation helped the common currency to reach its highest exchange rate against the greenback since December 13, Reuters reports.

The value of the currency increased after Europe pledged 150 billion euros ($196 billion) to the IMF, according to Bloomberg. The euro's value was also buoyed by Commerce Department data indicating that housing starts surged 9.3 percent to reach a seasonally-adjusted rate of 685,000 and building permits also rose 5.7 percent to hit 681,000. In December, German business confidence increased for the second consecutive month.

"We moved up on a better-bid euro, after the headlines that the IMF may put in more funding to help Europe," Bart Melek, an analyst at TD Securities in Toronto, stated via an e- mail, the media outlet reports. "Hopes of extra funds from the IMF boosted risk appetite, and we are seeing less liquidity-seeking activities."

The value of gold mining stocks could potentially mirror the increase in the price of the physical metal and firms that extract the commodity in resource-rich areas like Alaska might benefit from the appreciation.