Gold Fluctuates in London as Decline to Six-Week Low Spurs Investor Buying
July 8 (Bloomberg) -- Paul Ramscar, director wealth management at Financial Partners, talks with Bloomberg's Rishaad Salamat about the outlook for global economy. Ramscar also discusses the outlook for gold, and U.S. and China stocks. (Source: Bloomberg)
Gold fluctuated near $1,200 an ounce in London on speculation that the metal’s drop to the lowest level in more than six weeks is prompting some investors to increase holdings.
The metal fell to $1,185 an ounce yesterday, the lowest price since May 24, before rebounding to close above $1,200. The dollar slipped to the lowest level against the euro since May 12 today, while European equities rose as the International Monetary Fund raised its 2010 global growth forecast to 4.6 percent from 4.2 percent and on speculation tests on banks will ease concern about the health of the financial system.
“We are continuing to see very good physical demand” near the $1,200 level, said Walter de Wet, an analyst at Standard Bank Plc in London. “With markets as volatile as they are, there’s not the momentum yet for gold to move much higher, but it will be supported on dips.”
Gold for immediate delivery dropped $2.55, or 0.2 percent, to $1,200.20 an ounce at 11:28 a.m. in London. Prices gained as much as 0.4 percent and fell as much as 0.3 percent. Bullion for August delivery was $1 higher at $1,199.90 on the Comex in New York.
The morning “fixing” for gold in London, or price used by some mining companies to sell their production, rose to $1,201.25 an ounce from yesterday’s afternoon fixing of $1,193.25 an ounce.
Gold has weakened 5.1 percent since reaching a record $1,265.30 an ounce on June 21, limiting this year’s advance to 9.4 percent. The metal is set for a 10th annual gain as investors seek to protect their wealth from prolonged financial turbulence in Europe and on concern the global recovery may slow.
“Gold bulls will be heartened that gold was able to close above $1,200 yesterday,” said Ong Yi Ling, an analyst at Phillip Futures Pte. in Singapore. “Some investors may also bet that the corrective decline seen earlier had run its course and start accumulating long positions.”
Stress Tests
European Union banking regulators have told lenders that their planned stress tests on banks may assume a loss of about 17 percent on Greek government debt and 3 percent on Spanish bonds, two people briefed on the talks said yesterday.
Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, were unchanged at 1,316.48 metric tons yesterday, according to the company’s website. Global holdings of the metal by ETFs added 3.1 tons to a record 2,072.6 tons yesterday, according to Bloomberg data from 10 providers.
The European Central Bank will leave its benchmark interest rate unchanged at 1 percent at a policy meeting today, according to all 55 economists surveyed by Bloomberg. ECB President Jean- Claude Trichet will hold a media briefing after the meeting. The Bank of England will today keep the interest rate at 0.5 percent and maintain the size of its bond holdings, a separate survey showed.
Silver for immediate delivery in London was 0.3 percent lower at $17.9775 an ounce. Platinum was little changed at $1,527 an ounce, and palladium was down 0.5 percent at $449.10 an ounce.
To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Kyoungwha Kim in Singapore at kkim19@bloomberg.net.
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