Gold supported by safe-haven demand as equities, euro fall
Platinum (PL-FT) and palladium (PA-FT) fell in Europe on Tuesday, resuming last week’s downward slide, as investors were spooked by a further drop in the euro and equity markets, and as industrial end-users held out for lower prices.
Gold (GC-FT) prices meanwhile were steady near $1,190 (U.S.) an ounce as nervousness in the wider financial markets brought in some supportive safe-haven demand for the precious metal.
Spot gold was bid at $1,190.05 an ounce at 1108 GMT, against $1,190.05 late in New York on Monday.
Platinum fell around 3 per cent to a low of $1,478.25 and was later at $1,487.75 an ounce against $1,526.50, while palladium was at $426.75 against $444.50, having hit a session low of $420.88, down 5.3 per cent.
Platinum slid 12.3 per cent last week and palladium 17.2 per cent, its worst weekly loss since 2003, as a bout of fund selling early in the week sparked sharper losses in the metals. Both metals hit their lowest since February this year.
While interest by industrial users lifted prices in the last two sessions, caution towards the metals has reemerged as a 1 per cent drop in the euro and weak stocks undermined commodities.
“The euro is down to $1.2250,” said Afshin Nabavi, head of trading at Geneva’s MKS Finance. “On the back of that, we’re seeing a bit of long liquidation.”
“It is just nervousness in the market, and bit of a panic selling on the back of euro.”
A stronger dollar makes assets priced in the U.S. unit more expensive for other currency holders. Industrial users of PGMs are also holding out for lower prices amid expectations investors may further liquidate their holdings of the metals.
The euro fell 1.3 per cent to a near four-year low against the dollar on Tuesday as concerns about the euro zone’s banking system after the Spanish central bank’s takeover of savings bank CajaSur on Saturday spread caution in money markets.
European shares also extended losses to their lowest in nine months, while world and emerging stocks slid to their lowest since Sept. 2009 amid concerns over the euro zone banking system and tensions on the Korean peninsula.
U.S. gold futures for June delivery on the COMEX division of the New York Mercantile Exchange eased $4.10 to $1,189.90 an ounce.
ETF DEMAND STRONG
Among other commodities, oil (CL-FT) fell nearly 4 per cent, extending a drop below $68 a barrel, on fears Europe’s debt crisis would derail the global economic recovery. Industrial metals like copper (HG-FT) and aluminum (AL-FT) also fell.
While other assets are suffering from such concerns, gold is taking support from demand for the metal as a haven from risk.
“Gold is likely to continue outperforming the precious complex as long as uncertainty prevails with sovereign default fears still gripping the broader market,” said VTB Capital analyst Andrey Kryuchenkov in a note.
The world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Trust, (GLD-N) said its holdings rose more than 16 tonnes to a record 1,236.889 tonnes as of May 24.
“Global (ETF) holdings have grown by 3.63 million ounces so far this month,” said UBS analyst Edel Tully in a note. “This is by far the largest monthly increase this year, and the last time monthly ETF demand was so strong was October last year.”
“With four US trading days remaining in the month, it’s very probable that May’s ETF demand will outpace that of last October. Despite the impressive ETF demand this month, it lags behind the 6.8 million ounces recorded in Feb 2009.”
High prices are curbing demand in major gold-buying centres, however, with Indian demand falling as rupee weakness made gold expensive for local buyers.
Silver (SI-FT) was bid at $17.62 an ounce versus $17.82.
