Gold Holds Steady on Sovereign-Debt Fears

via WSJ

Gold futures were mostly steady, hanging onto the prior session's
gains amid concerns about European debt issues after reports that the
head of the International Monetary Fund and Spain's prime minister will
meet on Friday. This triggered initial worries that the country
may seek financial assistance, although Spanish officials said they will
not be seeking aid.

The market initially drew slight support
from soft U.S. housing starts but overall has reacted little to a heavy
slate of data that also included the producer price index and industrial
production.

In recent trade, gold for August delivery slipped 60
cents, or 0.1%, to $1,233.80 an ounce on the Comex division of the New
York Mercantile Exchange.

Jon Nadler, senior analyst with
Montreal-based Kitco Metals, described the early activity as "subdued,"
with traders "keeping an eye on the Spanish rumor mill." "Apprehensions
that the [European Union] debt issues could translate into difficulties
for the U.S. economic recovery are still preoccupying the trade," he
said. The euro weakened as traders fled Spanish bonds on worries
the country may seek financial assistance, with the gap in yields
between 10-year Spanish and German bonds widening. The single European
currency fell to $1.2294 from $1.2348 late Tuesday in New York.

Investors,
particularly those in Europe, have often bought gold on a flight to
safety in recent weeks whenever the Continent's debt problems appear to
worsen, thereby pressuring the euro. On Tuesday, gold rose even though
the euro and equities were higher. Normally, this might erode the
safe-haven buying of gold, but analysts described a mood in which some
investors used a recent price retreat as an opportunity to buy the metal
on ideas that euro-zone sovereign-debt issues would return to the
forefront.

Daniel Pavilonis, senior market strategist in
Chicago with Lind-Waldock, described early-morning U.S. economic data as
slightly supportive for gold. The data kept stock-index futures on the
defensive and could mean flight-to-safety flows into gold. "The
housing-starts number was pretty bad," he said. "Stocks are down, and it
[the data] might pull stocks down a little more."

May housing
starts fell 10% to an annualized rate of 593,000, worse than the
forecast for a 5.2% decline. The May producer price index fell
0.3%, less than the forecast 0.5% decline. May industrial production
rose 1.2%, when the forecast had been for a 1% increase.

ewww the WSJ