Gold Slips as Dollar, Stocks Post Gains
Tue March 18, 2003 05:26 AM ET
By Steven Swindells
LONDON (Reuters) - Safe-haven gold weakened on Tuesday, pressured by a stronger dollar and overnight gains on Wall Street after the United States issued an ultimatum to Saddam Hussein to flee.
Spot gold was quoted at $336.25/337.25 an ounce at 4:48 a.m. EST, down from $336.75/337.50 an ounce at the New York close on Monday and last week's three month low of $331.30.
It hit $339.75 an ounce in Asian trading but came off after President Bush's ultimatum.
"Gold climbed quickly to $340 as President Bush gave his speech but slipped lower as he added that military action would commence 'at a time of our choosing', as traders interpreted this to be a further extension to the timescale," said James Moore, metals analyst at TheBulliondesk.com.
For a snapshot of the latest developments in the Iraq crisis, please click on. IQ/UPDATE
Gold is off a 6-1/2 year high of $388.50 an ounce hit last month in anticipation of war.
The yellow metal has lost much of its so-called "war premium" this month as war looked increasingly likely, prompting many traders to follow a "buy the rumor, sell the fact" strategy.
Gains in the dollar and U.S. stock markets on the belief that a war in Iraq would be short and decisive took the shine off gold which acts as an insurance policy in uncertain times.
A firmer dollar makes gold less attractive to European investors.
The dollar held near Monday's two-month high on the euro and Swiss franc on Tuesday, as investors paused for reflection after a surge of optimism that a U.S.-led war with Iraq would be swift.
ON TENTERHOOKS
Gold and other financial markets will remain on tenterhooks over the next 48 hours, the time limit President Bush has given the Iraqi leader to leave the country.
"The speech was within the market's expectations, that is why we have seen this calm reaction," said Gordon Cheung, director at Mitsui Bussan Precious Metals in Hong Kong.
"I think that even if we start fighting, it will have little impact on the market," Cheung said.
Gold is not expected to regain recent peaks unless chemical or biological weapons are used in the conflict or there is a terrorist attack in the U.S. or elsewhere, analysts said.
Bullion has a history of price volatility in times of war.
Gold gained $45 to $415 when Iraqi forces invaded Kuwait in August, 1990, then fell by $40 to $366 when allied forces began action to evict Iraq from the Gulf emirate in January, 1991.
In other precious metals, silver was quoted at $4.47/49 an ounce from $4.44/46 at the New York close on Monday.
Platinum was quoted at $684/689 from $688/693 an ounce and palladium at $230/235 from $230/236.
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