Gold edges down as investors fret over Europe
Singapore, December 8, 2011
Gold inched lower on Thursday, along with equities, as concerns set in about whether European leaders would be able to come up with a concrete plan to contain the region's crippling debt crisis at a crucial summit on Friday.
Hopes for a definitive plan to tackle the two-year-old euro zone debt crisis were feeble a day before the key EU summit, echoed by comments from a senior German official and new figures exposing deepening stress among Europe's banks.
'A final solution out of Europe is highly unlikely,' Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong, said, but added that a serious misstep also looked unlikely as central banks and finance ministries have shown the will to cooperate to fight the crisis, which is threatening to split up the euro zone and sink the global economy into recession.
'I don't expect Merkel or any hawkish decision-makers to squander this opportunity to really make reforms, now that they have come so far. I don't see them capitulating at this point.'
A disappointing result from the summit could dampen the sentiment on the financial markets, and send gold prices lower along with riskier assets.
Spot gold inched down 0.3 percent to $1,736.09 an ounce, after two consecutive sessions of gains.
U.S. gold lost 0.2 percent to $1,740.60.
Investors were also eyeing a European Central Bank policy meeting later in the day for any hint that the ECB will intensify its bond buying support for the bloc's struggling periphery. The ECB is expected to cut interest rates and provide a fresh aid package for stressed banks in the region.
Buying on Asia's bullion market was lackluster, as most market participants have moved to the sidelines of the market waiting for the events in the euro zone to play out and point to a clear direction.
'We saw some buying when prices dipped below $1,720 in the past couple of days, but no one cares to buy now as prices are above $1,730,' said a Hong Kong-based dealer.
With just over three weeks left on this year's calendar, many funds have closed books early to book profit, leaving the market with the thin volumes and amplified volatility.
Holdings of the SPDR Gold Trust, the world's biggest gold-backed exchange-traded fund, dipped 2.117 tonnes to 1,295.811 tonnes by December 7, after remaining unchanged for three consecutive sessions.
Spot palladium rose to $686 an ounce in the previous session, its highest since late September. Prices eased to $670.72, down 0.4 percent from the previous close.
In other markets, Asian shares fell on concerns about the European debt situation and the euro edged down ahead of the ECB meeting that is expected to deliver a 25 basis points rate cut. – Reuters