Gold falls back in Europe, seen volatile
Tue February 11, 2003 05:50 AM ET
LONDON, Feb 11 (Reuters) - Gold prices looked vulnerable in European activity on Tuesday morning, having taken a sharp knock overnight when U.S. investors kicked off a much expected bout of selling.
Analysts said the precious metal could drop further, especially if the dollar continued to strengthen, although volatile moves were expected ahead of chief United Nations arms inspector Hans Blix's address to the Security Council on Friday.
Traders said aggressive selling from a U.S. bank had pushed gold down to its lowest level in 2-1/2 weeks in early European activity, noting some Swiss bank buying earlier.
"The dollar is also recovering against the euro and the aussie, so that has put pressure on gold," a London bullion trader said.
Spot gold was at $362.00/363.00 an ounce by 1035 GMT, falling below the last New York quote of $362.60/3.35.
"A further shake-out in gold looks more than possible over the next week or two although the longer term prospects for the metal remain attractive," said UBS Warburg precious metals analys John Reade in a report.
Overnight Asian activity was tempered due to a public holiday in Japan, which may only have delayed a further bout of selling from that sector.
Gold, one of the best performing investments in recent months, has recoiled by nearly $30 an ounce in the last week, as investors grabbed profits after fears of a war in Iraq pushed prices to levels not seen in more than six years.
Reports overnight that Baghdad would let United Nations inspectors use U.S. spy planes to search for weapons of mass destruction and diplomatic efforts in Europe to avert a war in Iraq took a bit of polish off the gold price, a dealer said.
European stocks bounced off six-year lows and the dollar extended gains on Tuesday as these markets took heart from Iraq's decision, further knocking the precious metal.
Traders were waiting for a key speech at 1530 GMT by U.S. Federal Reserve Chairman Alan Greenspan on the state of the U.S. economy. Investors are looking to Greenspan to create optimism about the direction of the world's biggest economy in the face of a possible war.
Investors have been hoarding gold since last year in hopes of countering any possible fallout in financial markets if war broke out.
France, Belgium and German have held up military deployments for NATO member Turkey, intended to protect it from Iraqi retaliation if U.S. troops attack Iraq from Turkish soil.
"I think we will continue to see volatile fluctuations this week, with a broad trading range looking like $358-72," said James Moore of TheBullionDesk.com.
Spot silver clung on precariously in positive territory at $4.60/4.62 an ounce, just above New York's close of $4.59/4.61, but only $3 above the previous day's two-month low.
"Silver has failed to hold its risk aversion gains and while the metal will continue to take its direction from gold, further underperformance looks likely," Reade said.
Silver has lost nearly 7.5 percent in the last week, tumbling away from last Wednesday's 6-1/2 month peak at $4.95.
Platinum was at $674.00/679.00, dropping back from $678.00/683.00 previously, while palladium slid to $245.00/251.00 versus $249.00/254.00.
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