Gold Falls in New York Trading as Rally to a Record Spurs Investor Sales
Gold declined in New York as some investors sold the metal after debt and growth concerns in Europe and the U.S. boosted prices to a record and increased scrap supply.
Bullion touched a record $1,594.90 an ounce yesterday on speculation that debt woes in the U.S. and Europe will escalate. Standard & Poor’s became the second rating company this week to say it may cut the U.S.’s top credit grade. Gold scrap supply is “noticeably above normal levels,” as prices rise, UBS AG said.
“The biggest risk to gold at current prices is not just investors banking profits,” but also scrap supply, Edel Tully, a London-based analyst at UBS, said in a report today. Still, “the overall macroeconomic climate is very supportive of gold.”
Gold for August delivery fell $6.70, or 0.4 percent, to $1,582.60 an ounce by 8 a.m. on the Comex in New York. Prices are up 2.7 percent this week and rose the previous eight days, the longest streak of gains since April. Immediate-delivery gold was down 0.3 percent at $1,582.10 in London after reaching a record $1,594.45 yesterday.
With gold above $1,580 an ounce, physical sales are the strongest in more than 13 months, Standard Bank Plc said today in a report. Physical buying when the metal was close to $1,500 was the strongest in more than 15 months, it said.
S&P said it may lower the U.S.’s long-term rating by one or more notches into the AA category if it concludes Congress and President Barack Obama’s administration haven’t achieved a credible solution to the rising government debt burden and aren’t likely to achieve one in the near future. Moody’s Investors Service put the U.S.’s Aaa credit rating on review for a downgrade on July 13, citing concern officials won’t raise the debt limit in time to prevent a missed payment.
No More Time
There’s “no way to give Congress more time” on lifting the debt limit, Treasury Secretary Timothy F. Geithner said after meeting with Democratic lawmakers on Capitol Hill in Washington. He has repeatedly said the U.S.’s borrowing authority will end on Aug. 2 without congressional action.
The Federal Reserve is prepared to take additional action, including buying more government bonds, if the economy appears to be in danger of stalling, Chairman Ben S. Bernanke said July 13.
“We just want to make sure that we have the options when they become necessary. But at this point, we’re not proposing to undertake” a third round of quantitative easing, he said yesterday.
Credit Ratings Cut
Ireland this week became the third nation in the European Union to have its credit rating cut below investment grade, helping to send gold priced in euros and pounds to record highs. The European Banking Authority will today release the results of the stress tests for 91 banks as part of an effort to reassure investors the region’s banks have sufficient capital.
Gold advanced 11 percent this year after climbing for the past 10 years, the longest run of gains in at least nine decades in London. Twenty-four of 27 traders, investors and analysts surveyed by Bloomberg, or 89 percent, said bullion will rise next week. One predicted lower prices and two were neutral.
“The next psychological barrier will be around the $1,600 level,” Natalie Robertson, an analyst at Australia & New Zealand Banking Group Ltd. (ANZ), said from Melbourne. “Given all the uncertainty in the market with the European debt crisis and more recently the U.S., the risk-off sentiment will continue.”
Silver for September delivery fell 1.2 percent to $38.235 an ounce, after yesterday climbing to a two-month high of $39.395 in New York. Palladium for September delivery slipped 1.3 percent to $773 an ounce. Platinum for October delivery was down 1 percent at $1,756.30 an ounce after yesterday reaching a four-week high of $1,784.90.
To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net
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