MW: Gold falls as investors sell metal for cash; copper slumps
Gold futures fell for a second session Tuesday, as investors sold the metal and other commodities to raise cash amid growing concerns over big banks and the spreading swine flu.
The Federal Reserve is pressuring Citigroup Inc. and Bank of America Corp. to raise more capital, The Wall Street Journal reported. Meanwhile, General Motors Corp. outlined a new turnaround plan that would leave the U.S. government controlling the company.
"Cash conservation seems to be foremost in traders' minds," said George Gero, a precious-metals trader for RBC Capital Markets. "Sellers in gold, crude, and copper appeared from funds interested in raising cash, concerned with swine flu hurting economies and more uncertain outcome of automobile bailouts."
Gold for June delivery lost $20.70, or 2.3%, to $887.50 on the Comex division of the New York Mercantile Exchange. May copper declined 7.9 cents, or 4%, $1.9075 a pound. In other commodities, June crude lost $1.07, or 2.1%, to $49.07 a barrel.
Holdings in SPDR Gold Trust , the biggest gold exchange-traded fund, stood at 1,104.45 tons Monday, unchanged from a day ago, according to the latest data from the fund.
SPDR holdings indicated that "rising risk aversion did not spur investment demand [for gold]," wrote analysts led by Barbara Lambrecht at Commerzbank AG.
In the short-term, gold may remain under pressure, the analysts continued, as India's religious holiday, Akshaya Tritiya, has ended. The holiday was a major driver for physical gold demand that contributed to rising gold imports in April in India, the world's biggest gold consumer.
On Wall Street, U.S. stock futures dropped as the banking news worried investors and as the World Health Organization increased its threat level for the swine flu outbreak.
The Fed said Citi and Bank of America may need cash based on early results of the so-called stress tests. The capital shortfall amounts to billions of dollars at Bank of America, the Journal's report said.
Executives at both banks are objecting to the preliminary findings, it said.
Meanwhile, the World Health Organization raised its swine flu threat level to Phase 4 from Phase 3. The new level is just two steps short of declaring a full pandemic. The WHO also said it was now too late to contain the virus.
In other metals, May silver lost 61.5 cents, or 4.8%, to $12.34 an ounce. July platinum sank $63.30, or 5.5%, to $1,087 an ounce.
Bucking the trend, June palladium rose $7.45, or 3.3%, to $236.40 an ounce.
