Gold weighed down by weak commodities

July 02, 2011

Gold bars are seen at the Czech National Bank in Prague January 31, 2011. — Reuters pic

NEW YORK, July 2 — Gold fell around one per cent yesterday to record its second straight weekly loss, dragged down by fund selling amid commodity weakness and as safe-haven buying faded after Greece’s approval of an austerity package. Bullion came under pressure as Wall Street rallied after a surprising jump in US manufacturing data eased concerns about a tepid economic recovery. Slipping crude oil and grain prices also diminished gold’s appeal as an inflation hedge.
“Gold clearly is not getting a lift from the global economic picture or from the sovereign debt front, and commodities as an asset class is not attracting the same level of fund buying like they were a month or two months ago,” said Bill O’Neill, of commodities investment firm LOGIC Advisors.
The metal has shed five per cent in the past seven sessions, partly due to technical selling as gold dived below US$1,500 (RM4,500) an ounce and fell toward its 100-day moving average.
Spot gold fell as low as US$1,478.01 an ounce, its weakest since May 17, and was down 0.9 per cent at US$1,486.51 by 2:50 p.m. EDT.
US gold futures for August delivery settled down US$20.20 at US$1,482.60, after trading between US$1,478.01 and US$1,502.19.
Gold fell one per cent for the week.
Silver was down 2.5 per cent at US$33.77 an ounce. Holdings of the world’s largest silver-backed exchange-traded fund, the iShares Silver Trust, fell 1.4 million ounces or 0.5 per cent on Thursday, the fund’s website showed.
The trust saw its biggest quarterly outflow since its launch in the three months to end June, data on its website showed, as investors turned their backs on silver amid fears the metal’s rally to record highs had been overdone.
The Greek parliament’s acceptance this week of a package of austerity measures needed to obtain further funding from the European Union and International Monetary Fund has tempered some risk aversion in the market, curbing demand for gold.
“Without a Greek default or something similar, it is difficult to think of a catalyst that would send gold to new record highs,” said Robin Bhar, an analyst at Credit Agricole.
“The other factor that could is more quantitative easing out of the United States, which is unlikely at the moment,” he added. “We think the dollar is probably in for a rebound, so that provides a bit of a headwind for gold.”
The dollar index rose for the first time in the last five days, and is likely to gain further against the euro given investors’ belief that Greece’s debt crisis is far from over.
Investors’ attention focused on the equity markets as July started on a positive note for US stocks with Wall Street notching its fifth day of gains after an encouraging manufacturing report.
“We have clearly seen a relief rally across the board in all risk assets, and gold, (which benefits from) fear of default, is coming off,” said Credit Agricole’s Bhar.
Platinum group metals have outperformed gold this week, with platinum rising two per cent and palladium up four per cent, as a risk-on trade benefited industrial metals more than gold.
Spot platinum was down 0.4 per cent at US$1,713.49 an ounce, while spot palladium was up 0.3 per cent at US$754.60 an ounce. — Reuters