Gold Futures Up Second Day on Eurozone Crisis News

For the second day in trading, gold futures were up 0.3% to $1,795.50 an ounce, and traded as high as $1,798.60 in the lead up on fears that the debt crisis in Europe will intensify.

Italian Prime Minister Silvio Berlusconi won a routine budget vote on Tuesday, but failed to obtain an absolute majority- and calls for the PM to resign amid the deepening fears continued. Managing director at Global Hunter Securities Jeff Wright commented on the link between Italy’s woes and investor confidence in gold futures, speaking to MarketWatch:

“The daily battle is headlines from Europe,” specifically on Italy or the Greece debt crisis and changes in government leadership, and “short-term profit taking, which keeps gold’s progression higher in check… The solutions to Greece/Italy are all inflationary in nature; inflation is supportive of gold as it erodes the value of currencies.”

Wright continued:

“While Italy does not have direct impact on gold,” said Wright, “Italy’s instability continues to fuel the feeling the crisis is not contained, and will spread further in southern Europe.”

Wright had two more points to make on the predicted upward trend in gold futures. Of the Eurozone problems as a whole, he added that for the problems the countries are facing, that “most solutions will be inflationary, which increases price of gold.” As for news Monday that Germany would not be selling any of its gold reserves was a “good sign for gold to continue upward trend in coming weeks.” Ultimately, he predicted that gold futures would go as high as $2,000 by Q2 of 2012.