On the news that Fitch Ratings downgraded the credit ratings of Italy and Spain Friday, gold fell $10.80 or 0.7% per troy ounce on the Comex division of the New York Mercantile Exchange to trade at $1642.40. The Wall Street Journal explains that gold slipped into the red after the credit downgrades stoked investor concern over the state of Europe’s financial system. The downgrades were not unexpected, rather they served to validate investor fears.
The worry is that the EU debt crisis will cause a sort of “credit crunch” that puts pressure on the entire commodities market. For instance, the prices of platinum, palladium and silver, each metals used in industrial applications, sank to their lowest level in several months because if a global slowdown happens, manufacturing will be cut first and the demand for those metals will decline sharply. Platinum fell 0.8% to $1,496 a troy ounce, palladium fell 0.9% to $593.45 an ounce and silver fell 2.9% to $31.08 an ounce.
Early in the day, precious metals had experienced a brief surge on reports that the US aded more jobs than had previously been estimated, allaying concerns about US financial health.
October 11, 2011
Europe, Gold