Gold hits 6-week low as equities weaken
London, October 23, 2012
Gold prices fell 1 per cent on Tuesday as the dollar firmed against the euro and stock markets fell, with appetite for assets seen as higher risk hurt by a credit downgrade of five Spanish regions and a raft of soft corporate earnings reports.
Soft results statements from the likes of Caterpillar, General Electric and Alfa Laval have undermined stock markets, while Moody's decision to cut its ratings on regions such as Catalonia pushed the euro zone debt crisis into the spotlight.
Pressure on gold from weakness in stocks helped push prices to six-week lows at $1,711.40 an ounce, putting it on track to decline in October for the first month in five.
Spot gold was down 0.9 percent at $1,713.40 an ounce at 1009 GMT, while U.S. gold futures for December delivery were down $11.50 an ounce at $1,714.80.
The metal has struggled for traction after twice failing to break through the $1,800 level. It hit a 2012 high earlier this month at $1,795.69 after the Federal Reserve unveiled a fresh round of quantitative easing measures to stimulate growth.
"You've had QE priced in and what we're seeing now is a bit of a retracement following that," Deutsche Bank analyst Daniel Brebner said.
"We have a pause in monetary policy action - it's very unlikely we're going to see anything in the US and China while there is politicial transition.
"Conditions economically remain tenuous... there are concerns with respect to growth, and therefore the potential for deflation is starting to pick up a little bit," he added.
"This is really causal to gold's decline. We're likely to see some support around the 1,700 level, but right now I'd characterise the market as being in a trading range, with some downward pressure within that."
Attention is now turning to the two-day meeting of the US Federal Reserve in Washington. While the Fed is not expected to add to last month's QE pledge, its comments will be closely watched for clues on the next direction of policy.
The Fed explicitly tied its $40 billion a month programme to the health of the US jobs market. While some recent data have been encouraging, the jobless rate remains elevated at 7.8 per cent.-Reuters