Gold drifts down, distracted by base metals market
biz.yahoo.com
Monday October 22, 6:27 am Eastern Time
LONDON, Oct 22 (Reuters) - Gold prices drifted back on Monday morning in Europe, as many market participants turned their attentions to the base metals with the onset of London Metal Exchange (LME) dinner week, traders said. By 1008 GMT, spot gold was indicated at $277.50/278.00 a troy ounce, down from the last close of business in New York on Friday at $279.40/280.15 an ounce.
The metal crawled lower at the morning fix to set at $277.55 an ounce, against $279.15 on Friday afternoon in Europe, and with most players looking at developments in the base metals during LME dinner week, the industry's annual gathering in London. ``We have LME week...and generally gold is always quiet throughout that week. Most dealers are out of the office and not even trading in precious metals...they are doing things in base metals instead,'' one London-based trader said.
Gold bullion lost virtually all of its safe haven gains last week, amid stale long liquidation, as funds jumped ship on the metal's failure to rally in the face of global uncertainty and the spate of potentially life-threatening anthrax bacteria in the United States. ``The lack of surprises out of Afghanistan and, critically, the stalled move upwards in gold prices, lead to the continuation of the unwinding of long positions that began the previous week,'' Macquarie Research analyst, Kamal Naqvi said.
Although, traders said the metal was finding support on the way down on the back of anthrax scares and some physical demand at the lower levels, they did not rule out falls to the low $270s by the end of the week. ``Buying may start to re-emerge at $272 because that is where we were effectively before the attacks on the U.S....but for the moment the selling will push it to the low $270s,'' the trader said. However, analysts said the expectation was that the metal would consolidate around current prices, with the market looking towards military and economic developments before a more sustainable trend is seen.
Gold's upside potential has also been dealt a blow by a persistently firm dollar in the face of the global economic slowdown. In the foreign exchange markets, the dollar remained resilient on Monday morning, showing a muted reaction to weekend news of the first U.S. commando raid on Afghanistan. Meanwhile the euro teetered close to five-week lows, trading at around $0.8995, as concerns mount about the eurozone growth outlook.
SILVER OFFERS NO SURPRISES AND PGMs GRIND LOWER
Despite opening a shade higher, silver lost some slight ground during early trading, drifting back to $4.24/4.26 an ounce, from $4.25/4.27 at the close in New York on Friday. Following gold lower, silver is now back in its pre-September 11 trading range and remains vulnerable to further moves lower in the face of long liquidation, the moves in gold and its own poor physical fundamentals, analysts said.
After a strong start to last week, the platinum group metals eventually gave up any gains to open lower in Europe on Monday morning. Platinum's initial surge last week, bouyed largely by firmer lease rates on the back of Credit Suisse's withdrawal from its precious metal operations in New York, London and Sydney, was capped by poor industrial demand and ample supply. Platinum's one-month lease rates are at 20 percent, down some seven percent from this time one week ago. ``Platinum is drifting back down to the levels where people are waiting for the buying to come back in,'' a trader said. ``However, platinum looks like it is going to firm up around the $400 level.. it looks fairly well supported down there,'' he added. Spot platinum was last at $425.00/431.00 versus a New York close at $435.00/442.00 on Friday. Palladium is seen softening further, with prices potentially falling to the low $300s or high $200s before staging any bounce higher. `Moves lower could spark a bit of buying as opposed to the borrowing which has hammered the market of late,'' a trader said. |
