NY Precious Metals Review: Gold Hits 20-yr Low; Bears Prevail
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May 19-MAR--
[B] NY Precious Metals Review: Gold hits 20-yr low; bears prevail
By Melanie Lovatt, Bridge News
New York--May 19--COMEX Jun gold futures settled down 70c at $273.50
per ounce after falling to a contract low of $272.40 early in the session.
This was also a 20-year low on monthly continuous charts. Gold remains a
victim of the overwhelming negative sentiment which followed the UK
Treasury's May 7 announcement that it will sell over half of its gold
reserves. Fears that other central banks will sell gold remain foremost in
the minds of most investors and these worries are eclipsing any other news
and keeping heavy downwards pressure on prices.
* * *
Traders said that prices in Europe slipped on fund sales, noting that
some players sold off heavily at the COMEX gold open because they were
anticipating that type of activity here. However, gold continued to edge
up from its early lows throughout the session as some of the shorts took
profits.
Market players today paid little heed to statements by Bank of France
governor Jean-Claude Trichet, saying that France, US Federal Reserve, Bank
of Italy and Germany's Bundesbank were not planning to sell their gold
reserves (Story .14717)
Just after today's 1430 ET close, outgoing US Treasury Secretary
Robert Rubin asked a Senate Appropriations subcommittee to approve the
Clinton administration's request for the IMF to be allowed to sell some of
its gold reserves to help fund debt relief for poor countries.
In testimony to the Senate Foreign Operations Subcommittee, Rubin said
while the gold-sales proposal has "received considerable attention...we
believe it is reasonable for the IMF to use income derived from
investments resulting from the sale of a small portion of gold reserves."
(Story .22655)
Meanwhile, traders said that the US Federal Reserve's move to a
tightening bias Tuesday was possibly pressuring the market because players
fear that a future rate hike can increase costs of holding physical assets
like gold.
Despite its role as an inflation hedge, gold has so far failed to get a
boost from the Fed's assertions that inflation is becoming a concern.
Others said that the Fed news was largely irrelevant after the UK's
sale announcement. Players continue to position themselves ahead of the UK
Treasury's gold sale, which will start Jly. Activities so far have
included outright sales, to push prices lower to "get a good price at the
UK auction," and also buying of put-options, said one trader.
Continued strength in the US dollar was also undermining gold prices.
Today the dollar jumped to 124.69 yen, its highest level since October.
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The Bridge ID for this story is 02333
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