Gold Drops to Six-Week Low on Strengthening Dollar, Selling by Investors
Gold declined to a six-week low in New York as some investors sold the metal after its rally to a record last month and as a stronger dollar sapped bullion’s appeal as an alternative asset.
The dollar gained against the euro after International Industrial Bank, the Russian lender controlled by lawmaker Sergei Pugachyov, said it defaulted on 200 million euros ($252 million) of bonds that matured yesterday. Gold, which typically moves inversely to the greenback, has dropped 6.3 percent from a record set on June 21.
Gold “is looking increasingly bearish and we could see even more technical selling and profit-taking,” said Andrey Kryuchenkov, an analyst at VTB Capital in London. Still, “the downside will remain very limited as long as economic uncertainty prevails.”
Gold futures for delivery in August lost as much as $9.70, or 0.8 percent, to $1,185.40 an ounce, the lowest price since May 24. The metal traded at $1,186.90 at 8:02 a.m. on the Comex in New York. Gold for immediate delivery in London was 0.5 percent lower at $1,186.70.
The metal fell to $1,186 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,195 at yesterday’s afternoon fixing. The dollar gained as much as 0.6 percent against the euro today.
“The dollar is exerting an influence on gold at the moment,” said Park Jong Beom, a Seoul-based senior trader with Tong Yang Futures Co. “Gold has been losing some momentum since breaking higher to a record last month as more investors are enticed to book profits.”
Chinese Buying
Bullion futures have climbed 8.3 percent this year, reaching a record $1,266.50 last month, as investors sought to protect their wealth from prolonged financial turbulence in Europe and on concern the global recovery may slow. The International Industrial Bank said yesterday that it is considering a “limited extension” of maturity on the notes and plans to meet with bondholders in London on July 21.
Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, fell 2.43 metric tons to 1,316.48 tons yesterday, according to the company’s website. Global holdings of the metal by ETFs added 1.9 tons to a record 2,069.5 tons yesterday, according to Bloomberg data from 10 providers.
Gold demand in China gained in the first half as government measures to cool the property market and falling equities spurred buying, Song Yuqin, vice general manager at the Shanghai Gold Exchange, said today at a conference in Beijing.
Gold is unlikely to become a major holding in China’s foreign reserves owing to the metal’s big price swings and lack of interest payments, China’s State Administration of Foreign Exchange said in a statement on its website. China will “carefully consider” whether to raise or reduce the amount of gold it has, the regulator said.
Silver for September delivery in New York lost 1.3 percent to $17.63 an ounce. Platinum for October delivery fell 0.5 percent to $1,511.20 an ounce. Palladium for September delivery declined 1.1 percent to $435.60 an ounce.
To contact the reporters on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net.
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