By Simon Avery
The price of gold is showing some strength Friday after a wild selloff the day before.
Bullion is up $6.33 to 1205.28 (U.S.) an ounce today in New York. That follows a 3.5% drop yesterday, when the precious metal sank to $1,196.95, the lowest price since May 25 and the biggest single day drop since February. (For context, gold is up nearly 10% this year.)
So what's really been going on in the last 24 hours?
Colin Cieszynski, market analyst for CMC Markets Canada in Toronto, suggests that Thursday's selloff came as fears of a European-led double dip recession appeared to be easing. Traders began moving capital out of defensive positions, namely gold and the U.S. dollar, into other currencies and more aggressive holdings.
Today, the Spanish Prime minister is scheduled to meet with the IMF, which may give an indication of whether Spain may need to tap into emergency funding pools, Mr. Cieszynski says.
Meanwhile, the U.S. currency continued to slide Friday, after falling to its lowest point in nearly two months on Thursday, and the euro briefly topped $1.26 (U.S.). Some market watchers say the currency shifts signal an unwinding of short positions by traders who were betting the euro would keep falling on sovereign debt troubles.