Friday, 22 June 2012

Gold slips in Europe

Gold was on track for its biggest one-day fall in a fortnight on Thursday after the Federal Reserve disappointed hopes for more aggressive monetary stimulus, lifting the dollar and bringing forward expectations for a rise in US interest rates. 

After a policy meeting ended on Wednesday, the Fed said it would extend an existing programme aimed at bringing down long-term borrowing costs and stimulating growth, dubbed Operation Twist, but did not announce a new round of quantitative easing, which some investors had hoped for. 

Traders said the decision not to embark on a new programme means the Fed is likely to start raising rates earlier than its own guidance suggests. Spot gold was down 1.5 percent at $1,582.09 an ounce at 1405 GMT, while US gold futures for August delivery were down $33.00 an ounce at $1,582.80. "Currently we're seeing a bit of follow-through from disappointed investors but believe we should be finding support pretty soon," Saxo Bank vice president Ole Hansen said. 

"Commodities, especially energy, are not having a good time, with the GSCI (index) approaching bear market territory. This is pulling the whole sector lower at the moment as redemption and general nervousness about the near-term prospect is causing some selling, but gold and agriculture stand out, I would say." Gold had risen as high as $1,640.50 an ounce earlier this month on hopes the Fed would unveil fresh quantitative easing measures to stimulate growth after a spate of disappointing economic data. 

That would have maintained pressure on long-term interest rates, keeping the opportunity cost of holding gold at rock bottom, and may have pressured the dollar. Prices started to correct even ahead of the Fed statement as speculation grew that full QE was off the table, but more selling was seen on Thursday. 

"We are wary of the potential impact of the looming 'fiscal cliff' in December, when the latest roll-over Bush-era tax credits are due to end could see consumer purchasing power fall substantially," investment bank Fairfax said in a note. "We expect the Fed to take further action before this event to avert yet another potential crisis." "We see gold as attractively priced at these levels, and we see the potential for further QE in the United States, China and Europe as leading gold higher this year." 

From a technical perspective, analysts who study past price moves for clues on the future direction of trade see solid support for prices around $1,580/1,560. Further consolidation around current levels is expected. Physical gold traders in India, the world's biggest consumer of the metal, kept to the sidelines despite its price fall, seeking a bigger retreat in spot prices. The rupee's fall to a record low against the dollar kept local prices high. 

Silver was down 2.2 percent at $27.48 an ounce. The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, rose above 57 on Thursday, moving back towards the year's high, as the grey metal underperformed. Spot platinum was down 0.2 percent at $1,447.75 an ounce and spot palladium was down 0.7 percent at $610.75 an ounce. 

Monthly Swiss imports of raw and powdered platinum from South Africa, source of nearly four out of five ounces of world supply of the white metal, fell to their lowest in more than two years in May, Swiss customs data showed on Thursday. "We saw in today's South Africa trade balance that platinum exports from SA were low in Q1," Standard Bank analyst Walter de Wet said. "This should have spilled over into April and May." 

Copyright Reuters, 2012

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