Gold Declines as Dollar’s Rebound Erodes Demand From Investors
Dec. 8 (Bloomberg) -- Gold dropped for a third day in New York as a rebounding dollar curbed the metal’s appeal as an alternative investment.
The dollar gained as much as 0.7 percent against the euro after yesterday climbing to a one-month high. Gold typically moves inversely to the dollar and has added 30 percent this year as record-low Federal Reserve interest rates contributed to the currency’s 5.3 percent drop. Some central banks have bought bullion, helping to push prices to a record last week.
“Some investors will use it as a good opportunity to buy on dips,” Andrey Kryuchenkov, a VTB Capital analyst in London, said of the drop in a report. The current slide is “very healthy” and will enable gold to build “a good base for further growth in 2010,” he said.
Bullion futures for February delivery on the New York Mercantile Exchange’s Comex unit lost $18.50, or 1.6 percent, to $1,145.50 an ounce at 8:31 a.m. local time. Gold for immediate delivery in London was 1.3 percent lower at $1,143.62.
“Traders continue to track the dollar,” James Moore, an analyst at TheBullionDesk.com in London, said in a report. “Expectations of record-low U.S. interest rates will likely limit substantial weakness in gold.”
Up to $1,200?
The metal increased to $1,164.25 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $1,142.50 at yesterday’s afternoon fixing. Prices may “test up to the $1,200 area” by the end of the year, said Chad Walls, head of precious-metals trading at Fortis Bank in Hong Kong.
Bullion futures touched a record $1,227.50 an ounce on Dec. 3. Prices have rallied as central banks from Russia to Sri Lanka added more of the metal to reserves, and funds and individuals boosted purchases to protect their wealth against the weaker dollar and an expected strengthening of inflation.
“There is much investment and central-bank demand waiting in the wings,” GoldCore Ltd., a brokerage in Dublin, said today in a note. “December and the early new year are traditionally a seasonally strong time for gold, and the increasing importance of Chinese New Year to world gold demand could see a rebound faster than many expect.”
Further gold holdings are unattractive because the metal offers no cash returns, according to the Bank of Korea, which is diversifying foreign-exchange reserves away from a falling dollar. Most other central banks aren’t buying and the metal is too volatile, it said.
Gold ‘Illusion’
“There’s an illusion in gold,” Lee Eung Baek, head of the bank’s reserve-management department, said in an interview. “We follow the big trend. Gold isn’t the trend. Out of more than 200 nations, how many countries have bought bullion?”
The metal may average $1,150 an ounce next year, up from a previous estimate of $950, HSBC Securities analyst James Steel said in a report today, citing a weakening dollar and rising commodity prices. Prices may average $975 in 2011, he said.
Silver for March delivery in New York lost as much as 2.5 percent to $17.905 an ounce and last traded at $17.94. Platinum for January delivery added 0.2 percent to $1,447.50 an ounce, and palladium for March delivery was little changed at $375.75 an ounce.
Steel raised his 2010 forecast for silver by 21 percent to $17 an ounce, increased his platinum estimate 6.7 percent to $1,600 an ounce, and boosted his palladium prediction by 27 percent to $400 an ounce.
Platinum held in ETF Securities Ltd.’s exchange-traded products rose 0.6 percent to a record 432,457 ounces yesterday, according to the company’s Web site.
Gold supported but at risk to dollar short-covering
London, 08 December 2009 - Reaction to Friday’s strong US payrolls reading kept gold under initial pressure yesterday as the dollar traded to its best level in a month during European trade, with the DXY reaching 76.18 and the Euro dipping below 1.48 for the first time since November 4.
But the dollar reversed later in the day, trading lower after Federal Reserve chairman Ben Bernanke signalled that the Fed would probably maintain its outlook for an extended period of low interest rates, leading the DXY to close down 0.5 percent.
Currency fluctuations led to a choppy day for equities, with the Dow gaining just 1.2 points and the S&P down 0.25 percent as profit concerns emerged.
Data from Japan overnight has shown a much weaker Economy Watchers Sentiment, adding to existing concerns that an economic recovery in Japan is stalling as the government overnight announced a 7.2 trillion-yen ($81 billion) stimulus package.
The lacklustre close in US equities and Japanese recovery concerns have weighed on stocks overnight, with the Nikkei currently off 0.3 percent and the broader MSCI down 0.5 percent.
The dollar, meanwhile, has started mixed but currently stands up 0.15 percent ahead of UK House Price Index, German Industrial Production and US Economic Optimism data.
After a relatively flat Asian session, the stronger dollar put gold back under pressure, leading the yellow metal to a two-week low of $1,135.20 before consolidating around $1,140-45.
The greenback’s reaction to Bernanke’s comments led gold to close at $1,161 and the metal has also started in mixed fashion so far this morning as traders continue to track the dollar.
The expectations of record low US interest rates will probably limit substantial weakness in gold; however, the metal still remains at risk to pressure as further profit-taking is expected in the run-up to the end of the year.
Silver tracked gold lower across the European and US sessions on Monday, eventually dipping below $18 to $17.86 before bouncing towards the close, settling at $18.24.
Silver has started steadily and further chart support is expected around $17.80-18.00 although we still see the metal at risk to further long liquidation in the short-term.
Platinum closed unchanged Monday at $1,442, having recovered from a three-week low of $1,421 with holdings in the ETF Securities fund rising 2,400 ounces to a record 432,400 ounces. Sister metal palladium closed $2 firmer at $375.50.
Both metals will be looking to gold and the dollar for direction while further scaled-down investment demand is expected. Chart support in platinum is pegged at $1,410/1,390 and in palladium at $358/345.
Platinum sinks to 3-week low as long liquidation hits precious metals
London, 07 December 2009 - Platinum sank to its lowest in three weeks on Monday as a robust dollar continued to pile pressure on precious metals, as signs of a strengthening US economic recovery boost expectations of an interest rate rise.
Platinum fell as far as $1,423 per ounce, matching its low of November 20. It has now fallen more than $87 from 15-and-a-half-month highs month highs of $1,510 last week.
The metal was caught up in broad commodity-sector liquidation as the dollar stabilised around one-month gains against the euro, last at $1.4808. Dollar-based commodities have benefited in recent months on protracted dollar downturn.
Although the commodity uptrend broadly remains in place, as investors diversify out of the US currency and into hard assets to conserve value, a wobble in the dollar's trajectory has spooked investors.
"It's the soft money getting out - it all depends on the USD," one trader said.
ZKB gold holdings fall last week, interest in other precious metals rises
London, 07 December 2009 - Interest in the physically backed gold fund run by Zurich Cantonal Bank (ZKB) fell in the week to December 3, with investors again indifferent to the metal’s striking performance.
But holdings in the other precious metals funds rose, data showed on Monday.
Metal held to back ZKB’s gold ETF fell a net 38,000 ounces to 4.792 million ounces last week after rising to a near-record high of 4.83 million ounces in the previous week.
Despite last week’s gains - gold reached a record high of $1,226.70 per ounce on Thursday before retreating - the security has mostly had net redemptions over the past two months as investors lock in profits.
Conversely, platinum investment grew two percent or 4,758 ounces to 236,468 ounces in the same period after remaining unchanged 231,710 ounces for the previous two weeks. Platinum hit a new 16-month high above $1,500 per ounce last week.
And palladium holdings rose by 1.2 percent to 514,016 ounces from 507,673 ounces in the two previous weeks.
This was the second net creation of palladium securities since early April after a previous in the third week of November, which coincided with strong increases in prices to their highest in more than 16 months of $392 last week.
In silver, total investment grew 682,000 ounces or 1.2 percent to 57.366 million ounces from 56.684 million ounces previously. It reached a record high above 55.7 million ounces in the week to November 20.
Thursday, December 10, 2009
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