Gold retreats with euro, mounting growth concerns
London, October 10, 2012
Gold fell on Wednesday, poised for its first four-day losing streak since August, taking a cue from euro weakness as fear mounted on peripheral euro zone economies along with wider concern about the global economy.
Investors clung to the dollar, which held near a month high against a basket of currencies, with growing anxiety on the lack of a clear timetable for a Spanish bailout.
The International Monetary Fund expects a Spanish public deficit of 7 per cent of GDP in 2012, which sent yields on its 10-year paper nine basis points higher to 5.93 per cent.
The IMF cut its global growth forecast for 2012 to 3.3 per cent from an earlier estimate of 3.5 per cent and predicted a contraction in the euro zone of 0.4 per cent.
Spot gold, usually pressured by a stronger greenback, traded 0.1 per cent lower at $1,762.84 per ounce by 1052, close to a 10-day low. US gold futures were lower at $1,763.40.
"In the short term foreign exchange movements are what is moving gold. It's difficult to know whether it's dollar strength or euro weakness, but in the markets there is still clearly concern about what might happen to the euro," said David Jollie of Mitsui Precious Metals.
The single European currency was 0.1 per cent lower versus the dollar on Tuesday. European and Asian shares also lost ground.
Some analysts said bullion looked to have simply run out of steam after a rally in the third quarter that took prices to 11-month highs above $1,795, as major central banks loosened monetary policy.
"With the market stumbling in sight of $1,800/oz, we believe that the path of least resistance is lower, at least in the near term," HSBC said in a note to clients, adding that the market could probe $1,750.
"The long-running rally is intact, however, and we expect that gold prices will revive after a period of consolidation," the bank added.
INDIAN DEMAND DECLINES
A decline in demand for physical gold in India, the world's largest buyer of bullion, also stalled as a weaker rupee brought domestic prices higher.
The most active gold contract for December delivery on India's benchmark commodity exchange hit a high of 31,460 rupees on Wednesday.
"Deals are there, but not in a big way, as gold has moved up after the currency depreciated heavily," said a dealer with a private bullion-dealing bank, adding "the (buying) momentum is slow this week."
However, purchases of exchange-traded products (ETPs) provided some support. Bullion backed ETPs took in approximately 270,000 ounces of gold on October 9, taking total holdings to a record high of 74.76 million ounces.
Platinum fell on Tuesday as hopes raised that industrial unrest in South Africa, home to the largest platinum reserves, was abating. The rand firmed against the dollar after striking truckers agreed to return to work.
Spot platinum was down 1 per cent on the day at $1,662.75 per ounce.
Palladium also fell after data from China showed a 1.8 per cent decline in vehicle sales in September versus the year earlier period, the China Association of Automobile Manufacturers (CAAM) said on Wednesday.
Spot prices for the metal, which is used in the catalytic converters dropped 0.7 per cent to $648.00.
Silver fell 0.2 percent to $33.78 per ounce. – Reuters