DEZ
Gold Drops in London Trading on Indications Investment Growth Is Slowing
Feb. 15 (Bloomberg) -- Gold dropped in London on indications that investment growth in the metal may be slowing after prices reached a 25-year high almost two weeks ago.
New investment in exchange-traded funds that track the price of gold fell last week to its lowest since mid-November, according to HSBC Securities Inc. Hedge funds and other speculators on the Comex division of the New York Mercantile Exchange have cut their net-long position, or bets prices will rise, for three consecutive weeks.
``It may well be that the stalling in the gold price rally over the last few days reflects a slowing in inflows into the various exchange-traded funds,'' London-based HSBC analyst Alan Williamson said in a report today. ``With the major source of gold buying drying up over recent days, it's hardly surprising that the gold price rally has stalled.''
Gold for immediate delivery fell $1.65, or 0.3 percent, to $545.90 an ounce as of 1:41 p.m. in London. The metal reached $575.35 on Feb. 2. Gold climbed 18 percent last year, its fifth consecutive annual gain.
Gold futures for April delivery fell 50 cents to $548.40 an ounce at 8:53 a.m. on the Comex division of the New York Mercantile Exchange.
``There is some classic, typical profit-taking going on,'' Christoph Eibl, head of commodities trading at Zug, Switzerland- based Tiberius Asset Management AG, said in an interview today.
Gold has gained partly because of investor demand for commodities as a whole, according to a Merrill Lynch & Co. survey of investors published yesterday.
``In the eyes of these asset allocators, it would appear that gold is just another commodity,'' Michael Jalonen, Merrill Lynch's Toronto-based North American precious metals analyst, said in the report. ``Investors in this survey don't seem to be attributing gold's recent price rises to any fundamental change in consumer demand.''
Hedge Funds
Hedge-fund managers and other large speculators decreased their net-long positions in New York gold futures in the week ended Feb. 7, according to the U.S. Commodity Futures Trading Commission. Net-long positions fell 8.6 percent from a week earlier on the Comex, the Washington-based commission said.
``The hedge funds have pushed this market up, and now they are bringing it down again,'' said Eibl, who predicts the metal may trade as low as $530 this wee. ``Then we may see a small rebound as physical buyers come back into the market.''
Among other precious metals for immediate delivery in London, silver gained 5 cents, or 0.5 percent, to $9.36 an ounce. Platinum was unchanged at $1,015.50 an ounce, while palladium advanced $2.50, or 0.9 percent, to $283 an ounce.
To contact the reporter on this story:
Danielle Rossingh in London at drossingh@bloomberg.net.
Last Updated: February 15, 2006 08:57 EST
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