Gold, Silver Head Lower as Euro Drops, Debt Talks Continue

Gold and silver were heading lower Wednesday morning as private bondholders met in Paris to respond to Tuesday”s rejection of their proposal to write down the value of their Greek government bond holdings and swap them for new issues of 20- and 30-year Greek debt.

More encouraging news came from Germany, where the Ifo index of business confidence rose for the third-consecutive month in December, rising to 108.3 from 107.2 November. Here in the U.S., high-tech bellwether Apple (NASDAQ:AAPL) crushed earnings expectations, while the Federal Open Market Committee’s is expected to announce today it will maintain current interest rates.

Spot gold was down 0.7%, bid at $1,654.60 per ounce with an ask price of $1,655.60. Spot gold traded as high as $1,658 and as low as $1,648.20. The London afternoon reference price fix came in at $1,650, $15 per ounce lower than Tuesday’s reference price, according to Kitco market data.

Spot silver was showing a loss of 0.44%, bid at $31.91 per ounce with an ask price of $32.01. The morning high as of time of writing was $32.07 and the low was $31.46. Wednesday’s reference price was set at $31.67 in the London a.m., 28 cents per ounce lower than Tuesday’s reference price.

The failure of EU leaders and private bondholders to agree on a voluntary program of Greek bond write-downs and new issue swaps is the latest impasse in Europe’s sovereign debt crisis. IMF chief Christine Lagarde said the European Central Bank would need to write down its holdings of Greek government bonds should a voluntary resolution fail, an action that Germany’s Merkel administration, as well as the ECB, soundly rejected.

Gold bullion continued retreating in the London a.m. Wednesday, to $1,653 an ounce, according to BullionVault’s London Gold Market report. Trading was thin because of the week-long Chinese New Year holiday, while gold bullion prices were 0.8% lower for the week by lunchtime Wednesday.

“In the absence of sustained physical interest, gold is prone to a little more downside this week as bullion continues trading with global risk sentiment,” says VTB Capital analyst Andrey Kryuchenkov, adding that the U.S. Federal Reserve looks “set to remain accommodative for now which is, as ever, gold-beneficial in the long run.”

Gold trusts were heading lower Wednesday morning, while the iShares Silver Trust (NYSE:SLV) was higher.

• The SPDR Gold Trust (NYSE:GLD) was moving lower, down 0.4%.
• The iShares Gold Trust (NYSE:IAU) also was down about 0.4%.
• The iShares Silver Trust was up about 0.5%.

Gold and silver mining ETFs were mixed, with the Market Vectors Junior Gold Miners ETF (NYSE:GDXJ) showing a gain.

• The Market Vectors Gold Miners ETF (NYSE:GDX) was trading flat.
• The Market Vectors Junior Gold Miners ETF was up nearly 0.75%.
• The Global X Silver Miners ETF (NYSE:SIL) was down more than 1%.

Gold mining shares were mixed.

• Agnico-Eagle Mines (NYSE:AEM) was showing gains of more than 0.8%.
• Barrick Gold (NYSE:ABX) was up nearly 1.1%.
• Eldorado Gold (NYSE:EGO) was down 0.6%.
• Goldcorp (NYSE:GG) was nearly 0.7% lower.
• Kinross Gold Corp. USA (NYSE:KGC) was down 1.7%.
• Newmont Mining (NYSE:NEM) was up nearly 0.6%.
• NovaGold Resources (AMEX:NG) was down nearly 1%.
• Yamana Gold (NYSE:AUY) was trading lower, up some 0.3%.

Silver mining shares were mixed, with Pan American Silver (NASDAQ:PAAS) down sharply.

• Coeur d’Alene Mines (NYSE:CDE) was moving higher, up around 0.55%.
• Hecla Mining (NYSE:HL) was unchanged.
• Pan American Silver was down around 3.4%.
• Silver Wheaton (NYSE:SLW) was showing losses of around 0.15%.
• Silver Standard Resources (NASDAQ:SSRI) was down around 0.15%.

As of this writing, Andrew Burger did not hold a position in any of the aforementioned securities. Adrian Ash of BullionVault contributed to this report.