Comex gold futures prices ended firmer and near mid-range Wednesday. Precious metals traders were digesting and debating the reported move by the "bond king" PIMCO to dump its holdings of U.S. Treasury securities. Comex April gold last traded up $5.20 an ounce at $1,432.40. Spot gold last traded up $3.30 at $1,432.75.
Reports Wednesday said PIMCO is in the process of dumping all of its U.S. government debt. PIMCO had been the world's largest fund holding of U.S. government securities. PIMCO head Bill Gross is worried about the U.S. deficit and U.S. financial problems. PIMCO's move to dump U.S. debt can be viewed by gold market bulls as bullish, due to the implications of huge government deficits weakening the value of the U.S. dollar and the financial and economic standing of the U.S. in the world arena, in general. However, part of Gross's reason for dumping U.S. securities is that he believes the Federal Reserve will become less accommodative in monetary policy in the coming months, including the specter of rising interest rates, to fight inflationary price pressures. That could be viewed as bearish for the precious metals and bullish for the U.S. dollar.
Crude oil prices traded near steady Wednesday, and are above $104.00 a barrel. While there have been no fresh, major developments in the Middle East this week, traders are still very closely watching the price of crude oil as a gauge of the tensions in the Middle East. Some analysts believe a United Nations-established "no fly" zone over Libya could put serious downside price pressure on crude oil, which would also likely pressure the gold market. The stronger crude oil prices have been bullish for the precious metals due to the inflationary implications and the related geopolitical uncertainty that invites safe-haven demand.
The market place has this week again been reminded of the serious problems the European Union is facing with its smaller countries' sovereign debt. The EU debt situation will continue to limit selling interest in precious metals for at least the near term. This problem is not going to just fade away.