Cash Gold Declines After Global Equity Slump Prompts Rebound in New York
Gold fell after rebounding in New York from its worst two-day drop since 2008. Global equities tumbled in Europe and the U.S., prompting demand for a haven.
Bullion for immediate delivery declined 0.6 percent to $1,763.28 an ounce after gaining 0.8 percent yesterday. The metal dropped 7.3 percent in the two days through Aug. 24, the most since October 2008.
“The market will probably be in hold mode until we have a listen to what Bernanke says this evening at Jackson Hole,” said David Lennox, a resource analyst at Fat Prophets in Sydney. “I wouldn’t think traders would be too anxious to bet one way or the other at this point because I don’t think anyone really knows what he might say.”
Investors are awaiting a speech by Federal Reserve Chairman Ben S. Bernanke in Jackson Hole, Wyoming, at 10 a.m. New York time today and are looking for indications of whether the central bank will embark on further stimulus.
Cash gold has climbed 24 percent this year and reached a record $1,913.50 an ounce on Aug. 23. Metal for December delivery was little changed at $1,765.90 in New York.
“We think the price of gold today, unless something extraordinary happens, will probably remain pretty flat,” Lennox said in a phone interview.
Stocks dropped worldwide yesterday, snapping a three-day rally for the Standard & Poor’s 500 Index, after the U.S. said jobless claims increased and traders sold German equity futures before France, Italy and Spain extended curbs on short selling.
The S&P 500 fell 1.6 percent to 1,159.27 at 4 p.m. in New York, after climbing 4.8 percent over the past three days.
“Sellers tried to force gold under $1,700 and couldn’t, so the funds came back,” said Frank McGhee, the head dealer at Integrated Brokerage Services in Chicago. “This is long-term buying against the equities.”
Central banks are adding to reserves for the first time in a generation, joining billionaire investors including John Paulson in hoarding bullion. The Federal Reserve has taken the unprecedented step of saying it will keep borrowing costs at almost zero percent at least through mid-2013.
CME Group Inc. raised the margin requirements on gold futures trading at its Comex unit by 27 percent from the close of trading yesterday.
“Despite this week’s sell‑off, we expect the gold price to remain supported by a weaker outlook for the dollar and the economic and financial uncertainty” from the sovereign-debt turmoil in Europe, said Lachlan Shaw, analyst at Commonwealth Bank of Australia in an e-mail today.
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