The price of gold notched a record Tuesday because three confidence-draining forces hit investors just as they were dipping their toes back into the stock market.
Equities had been rising since last Thursday after a massive decline, and some traders dared to openly hope that the stock market was on a sustainable rebound. But they were disappointed for the following three reasons.
1. Fresh evidence that Europe's economy is slowing
Germany's economy, Europe's largest, grew at a seasonally adjusted rate of 0.1 percent in the second quarter , compared to a seasonally adjusted 2.7 percent increase in the same period last year. Analysts expected a 0.4 percent growth rate. Also, there was fresh data indicating the broader European economy slowed sharply in the second quarter to a 0.3 percent, less than analysts expected.
2. A lack of confidence in Europe's leaders
They still can't put a fence around the Greek contagion. In their latest effort to deal with the sovereign debt crisis, the leaders of France and Germany agreed to float proposals in September for a tax on financial transactions and push for closer joint governance of economic policy. But that did little to boost investor confidence. Many now expect Europe will have to either cut weak economies loss or forge a single economy out of the current 17 economies.
3. Continued weakness in the U.S. economy
U.S. housing remains a big problem. Commerce Department data showed that residential real estate is contributing little to economic growth as new construction of homes and apartment buildings in last month fell 1.5 percent from a month earlier to a seasonally adjusted annual rate of 604,000. The figure was better than the expected 4.6 percent drop to an annual rate of 600,000, but still underscored the weak domestic housing market.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
