UPDATE 4-Gold falls as global credit worries rise
Thu Aug 9, 2007 11:31 AM BST
Email This Article | Print This Article | RSS [-] Text [+] (updates with quotes, prices; changes byline, pvs Tokyo)
By Atul Prakash
LONDON, Aug 9 (Reuters) - Gold fell more than one percent on Thursday as concerns about a global credit crunch flared up and increased gold sales by central banks dampened market sentiment.
Spot gold <XAU=> fell to $667.00/667.60 an ounce by 1002 GMT from $674.20/675.00 late in New York late on Wednesday when it rose to its highest in nearly two weeks at $676.60 an ounce.
"A lot of investment funds are in trouble nowadays and if this continues, they would reduce a lot of risk positions, including gold, in their effort to generate some dollars," said Michael Kempinski, senior precious metals trader at Commerzbank.
"Physical demand is not strong anymore. There is a risk of downside movement in gold," he added.
Traders also said that heavy gold sales by some European investment banks pushed prices to intraday lows.
Stocks and credit markets weakened while the yen and safe-haven bonds surged after BNP Paribas suspended three funds hit by problems in the risky U.S. mortgage sector, triggering a new wave of risk aversion. Continued...
The French bank (BNPP.PA: Quote, Profile , Research) said it has suspended the funds as problems in U.S. subprime mortgages and diminishing liquidity are preventing it from calculating their value.
The news renewed worries that troubles in U.S. mortgages would spread globally by hitting banks, with the repricing of risks threatening to trigger a credit crunch and weigh on corporate and economic activity.
"We continue to expect elevated volatility across broad asset markets and while investor positioning in gold and silver is relatively low, any quick increase in risk reduction could see both metals move lower," John Reade, head of metals strategy at UBS Investment Bank said in a research note.
Traditionally gold is seen as a hedge against financial and political turmoil, but in recent months it has followed stock and credit markets as investors trimmed their portfolios.
Analysts said the recent sales by central banks also dampened sentiment. The Bank of Spain sold 0.8 million troy ounces or 24.8 tonnes of gold in July. Between March and May, the central bank sold 3.5 million ounces of gold but it took a break in June. Analysts said the bank has sold 134 tonnes so far in 2007.
According to industry-funded World Gold Council, European central banks have so far sold 358 tonnes of gold in the third year of the Central Bank Gold Agreement (CBGA), against an annual limit of 500 tonnes. The year ends in late September.
In other precious metals, platinum slipped to a one-week low of $1,270 an ounce on news that South Africa's National Union of Mineworkers (NUM) had reached a wage settlement with Anglo Platinum (AMSJ.J: Quote, Profile , Research), the world's biggest platinum miner.
Impala Platinum Holdings Ltd (IMPJ.J: Quote, Profile , Research) and Northam Platinum Ltd (NHMJ.J: Quote, Profile , Research) also signed wage agreements [ID:nL08910367]. The deals avoided strikes and may calm market nerves about possible stoppages in the world's number one platinum producing country.
Spot platinum <XPT=> was last quoted at $1,274/1,278, down from $1,284/1,288 in the U.S. market, while silver <XAG=> was at $12.98/13.02 an ounce, versus $13.10/13.15. Palladium <XPD=> was down $1 at $360/362 an ounce. (Additional reporting by Pratima Desai in London)
investing.reuters.co.uk. |
