Gold May Gain as Lowest Prices in Almost Three Months Fuel Investor Demand
Gold may gain in New York as the lowest prices in almost three months spur physical demand.
Futures yesterday fell the most in more than three weeks, dropping as low as $1,160.80 an ounce, as a rally in global equities eroded demand for bullion as an alternative investment. Physical demand for gold from India, China and the wider Asian region was “very visible” as prices declined this week, UBS AG said today.
“From a risk-reward perspective, this level presents a buying opportunity,” said Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland. “Physical demand is still active.”
Gold futures for December delivery added $3.20, or 0.3 percent, to $1,165 an ounce at 8:20 a.m. on the Comex in New York. Prices declined 2.1 percent yesterday, dropping for a third day. The metal for immediate delivery in London was little changed at $1,162.55.
European stocks were little changed near a 12-week high today. Holdings in the world’s biggest gold-backed exchange- traded fund declined for a second day yesterday.
Bullion futures have slumped by about $100 since reaching a record $1,266.50 an ounce on June 21 on reduced European financial turmoil and on signs the global economy is rebounding. Most European banks passed stress tests designed to show their ability to withstand a financial crisis, lenders and regulators said last week, helping to push the euro this week to an 11-week high against the dollar.
Lower ‘Fixing’
The metal fell to $1,164 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,168 at yesterday’s afternoon fixing. Spot and futures prices yesterday dropped below a 21-month trend-line.
“What can one say other than any and all support for gold has been broken,” said Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter. Long-term investors “now have several months of strong overhead resistance to overcome before they regain the upper hand.”
Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, declined 0.91 metric ton to 1,300.83 tons yesterday, according to the company’s website. Global holdings of the metal by ETFs increased 0.54 ton to 2,065.52 tons yesterday, according to Bloomberg data from 10 providers.
Yesterday and July 26 were the UBS sales desk’s strongest two days since January for selling to India by volume, analyst Edel Tully said today in an e-mailed report.
“The current decline in the gold price is probably only short-lived,” Eugen Weinberg, head of commodity research with Commerzbank AG, wrote in a report yesterday. “There are some religious holidays from the end of August” in India, the world’s largest gold consumer, which may propel demand, he said.
Silver for September delivery in New York was little changed at $17.635 an ounce. Platinum for October delivery added 0.3 percent to $1,542 an ounce. Palladium for September delivery was 0.7 percent higher at $469.80 an ounce.
To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net
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