Gold stuck at 4-month low, sheds war premium
Fri April 4, 2003 05:09 AM ET
By Clare Black
LONDON, April 4 (Reuters) - Safe-haven gold was pinned at four-month lows in Europe on Friday as U.S. troops closed in on Baghdad, with prices susceptible to erratic swings as events in Iraq unfold.
The dollar and stocks rose while oil dipped, causing an erosion in gold's safe haven premium.
Spot bullion sank to a low of $322.25 in Asian trading, its lowest point this year. By 0955 GMT, gold was indicated at $323.00/323.60 an ounce, down from New York's close on Thursday of $324.95/325.65.
Gold has slumped 4.5 percent this week alone as U.S. troops rapidly advanced on Baghdad and the metal is now far from February's 6-1/2 year high at $388.50.
"Gold has benefited disproportionately from all the geopolitical events, plus the weaker dollar and we're now seeing that come out of the market," Kevin Norrish, precious metals analyst with Barclays Capital, told Reuters.
Norrish, who holds one of the more bearish outlooks for the gold market, said he would not be surprised to see gold ultimately falling back down to around $300/oz.
Gold's rally over the past two years is due to a large part by producers ceasing forward sales, and "buying back" those hedges. But this phenomenon was expected to slow in 2003.
"And there is little sign of real investment demand apart from this short term war-type buying. I think it all adds up to a fairly fragile market," Norrish added.
Other analysts were more optimistic and saw prices rising again once operators shift their focus away from the war and back on to the global economy, which was still looking anaemic.
PHYSICAL BUYING EMERGING
The recent drop in prices has started to entice some physical buyers back to the market, having kept a low profile over the past few months in the face of such high prices.
"We are down at a level now where good physical demand is coming in, from the Far East and India, which is holding the selling," a senior London gold trader said.
Hong Kong dealers said physical buyers were "shopping around" in the market on Thursday, but actual buying on Friday was likely to be muted.
"Premiums have improved a lot but there is not that much trade yet," said Elison Chu, sales manager at Standard Bank London in Hong Kong.
Some buyers could be holding back to see whether gold falls further. Analysts said prices need to hold the key $320.40 level to avoid sharp losses, but if gold cannot get back above $325 in the next 48 hours, the market could slide.
"We're basically at crunch point now -- whether we can maintain $325...although I really can't see it below $320," the senior trader said.
In other precious metals, platinum was stuck at three-month lows after a recent pounding by Japanese sales. Spot was quoted at $613.00/618.00 from $617.00/622 previously.
"I think the market is likely to see further losses over the next few weeks now that the recent barrage of supply concerns and new industrial application news have subsided," James Moore of TheBullionDesk.com said in a daily report.
He was looking for prices to test the $575-600 level before working higher.
Palladium fared little better, floundering just above its lowest level in over 5-1/2 years. Spot traded at $173.00/178.00, unchanged from New York's previous close.
Silver was similarly unchanged at $4.41/4.43.
reuters.com |
