Gold declines after rally to record high prompts heavy sales

Bullion, up 23 percent this year, gained to a record US$1,097.72 an ounce Wednesday after the Federal Reserve pledged to keep borrowing costs low for an “extended period,” weakening the dollar. The Dollar Index added 0.4 percent Thursday. Gold also climbed this week as the Reserve Bank of India said it bought 200 metric tons from the International Monetary Fund.

“There's been some profit-taking, and there's a rebound in the dollar,” said Bernard Sin, head of currency and metals trading at bullion refiner MKS Finance SA in Geneva. “I don't see a substantial rebound in the dollar. Gold will still have a chance to move higher.”

Gold for immediate delivery lost as much as US$8, or 0.7 percent, to US$1,084.20 an ounce and was at US$1,088.61 by 11 a.m. local time. December gold futures were little changed at US$1,088.80 an ounce on the New York Mercantile Exchange's Comex division.

The metal slipped to US$1,088 in the morning “fixing” in London, used by some mining companies to sell production, from US$1,090 at Wednesday's afternoon fixing.

“I don't think this weakness will trigger a very big correction,” said Kate Harada, a senior trader with Mitsubishi Corp. Futures & Securities Ltd. in Tokyo.

The precious metal is set for a ninth annual gain as the Dollar Index, which measures the greenback's performance against the euro and five other currencies, has fallen 6.8 percent. The measure slipped 1 percent Wednesday after the Fed kept the target rate for overnight bank lending at zero to 0.25 percent.

“Gold's support level is at US$980 per ounce,” said Aaron Smith, managing director of Superfund Financial Singapore Pte.

Smith forecast last month that gold would rise to US$2,000 an ounce in the next three years, citing “massive” inflation.

The Indian central bank's purchase from the IMF was made last month at an average price of US$1,045 an ounce, and the US$6.7 billion acquisition increased its holdings to about 557.7 tons. The IMF agreed in September to sell 403.3 tons to shore up its finances and provide more low-interest loans.

“Despite the prevailing high price level, central banks from emerging economies are still willing to accumulate gold to diversify their currency reserves,” Eugen Weinberg, a senior analyst with Commerzbank AG, wrote in a note.

Prices may climb as high as US$1,300 an ounce should inflation concerns increase in the next year, Weinberg said in a Bloomberg Television interview Thursday. “At US$1,100, gold is definitely not in a bubble yet,” he said.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, were unchanged at 1,108.4 metric tons Wednesday, its Web site showed. Assets increased the previous day by the most in almost a month. Gold held in ETF Securities Ltd.'s exchange-traded products slipped 1.4 percent to 7.838 million ounces Wednesday, its Web site showed.

Among other precious metals for immediate delivery in London, silver fell 0.4 percent to US$17.38 an ounce. Platinum lost 0.7 percent to US$1,358 an ounce, and palladium was up 0.4 percent at US$330.75 an ounce.

ETF Securities' silver holdings added 0.1 percent to a record 21.438 million ounces Wednesday, while palladium assets increased 0.1 percent to a record 580,762 ounces, its Web site showed.

Subscribe to The China Post and save 25%. Click here

SharePrintEmail

Write a Comment

Enter your comments - 3000 characters max

Type in image code

Submit

 Receive China Post promos Respond to this email