Gold falls; traders fret over demand
Source: MarketWatch
metalsplace.com
Gold futures declined Tuesday to return almost all of the previous session's nearly $10-an-ounce gain as traders grappled with concerns over weak jewelry demand in the first half of the year and a hefty drop in oil prices
"The bullion market, while supported by fresh investment demand from India and China, still has an ominous cloud hanging over it: the tailspin into which jewelry demand has gone during the year, not only in India, but in another key country, Italy," said Jon Nadler, an investment products analyst at bullion dealers Kitco.com.
Last week, precious-metals consultancy GFMS Ltd. said jewelry demand falters in the first half of the year, with jewelry fabrication down nearly 30%.
"The Grinch is apparently stealing Christmas gifts of gold three months early, prompted by a dour-faced consumer who may either be unwilling to buy at close to $600 per ounce, or is expecting not to have discretionary money to do it with," said Nadler.
"If jewelers are reading the consumer correctly, they are taking a defensive posture and are not loading up on too much inventory that could remain unsold," he added.
Gold for December delivery closed down $9.60 at $583.20 an ounce on the New York Mercantile Exchange. It ended Monday up $9.80 at its highest closing level in three sessions as traders took advantage of last week's decline of 6% to buy back into the market at a discount.
Prices moved in tandem with the drop in oil prices Tuesday. October crude fell as much as 2.8% as concerns over the high level of crude supplies outweighed news of a Gulf of Mexico platform production delay and an Energy Department cut in the 2007 oil-output forecast.
"Only the eventual meltdown in the stock and bond markets...would be the event that would not only halt the slide in the metals complex, but provide the catalyst for a monumental rally in these markets," said Dale Doelling, chief market technician at Trends In Commodities.
Meanwhile, some weakness in the U.S. dollar failed to provide much support for gold.
The dollar fell sharply against the yen though it strengthened against the euro Tuesday, after two U.S. government reports showed softer-than-expected producer price inflation and weaker-than-forecast new construction of U.S. homes.
Also on Nymex, December silver fell by 34.5 cents to close at $10.945 an ounce after rallying almost 4% on Tuesday.
October platinum closed at $1,154.90 an ounce, down $12, while December palladium rose by $2.50 to end at $309.05 an ounce.
December copper, on the heels of the previous session's gain of over 3%, fell by 3.9 cents to close at $3.3755 a pound.
On the supply side, gold inventories were down 229,973 troy ounces at 7.79 million troy ounces as of late Monday, according to Nymex data. Silver supplies were unchanged at 105.7 million troy ounces, while copper supplies added 488 short tons to stand at 15,263 short tons. |
