Gold exchange traded funds were set to open the week with a 2% rise on reports of a banking sector recapitalization in Europe, while the euro strengthened against the U.S. dollar.
SDPR Gold Shares (NYSEARCA:GLD) was up 2% in preopen trade Monday. German Chancellor Angela Merkel and French President Nicolas Sarkozy will submit a plan to recapitalize European banks and address the debt crisis in Greece by the Nov. 3 Group of 20 summit, Bloomberg reported.
Gold prices finished last week with a slight gain and stocks rallied on hopes leaders in Europe will take the necessary steps to deal with the sovereign debt crisis.
In currency ETFs, CurrencyShares Euro Trust (NYSEARCA:FXE) vaulted 1.7% in Monday’s premarket following the pledge from France and Germany over the weekend. The dollar weakened and investors bid crude higher – U.S. Oil Fund (NYSEARCA:USO) rose 2.5%.
Gold ETFs have consolidated after their big correction in September.
The precious metal funds have been volatile but that hasn’t shaken the confidence of long-term gold bulls.
“People are thinking the newsflow is only beneficial in the short term. Europe still has to get its act together on a much longer-term basis,” said Credit Agricole analyst Robin Bhar in a Reuters report.
“While a detailed plan was lacking, we view any progress on bank recapitalization as a positive for gold,” added UBS in the article. “Typically liquidity concerns and funding issues are not gold’s friends.”
SPDR Gold Shares
Disclosure: Tom Lydon’s clients own GLD.
Read the disclaimer: Tom Lydon is a board member of the funds for Rydex|SGI.