BS: Gold May Fall in New York on Speculation Rally Was Overdone
Oct. 8 (Bloomberg) -- Gold may decline in New York, extending the biggest drop in more than two months, as the dollar strengthened and as some investors sell on speculation bullion’s rally to a record was overdone.
The dollar rebounded from near the lowest level since January against the euro. Gold futures, which yesterday dropped 0.9 percent after reaching a record $1,366 an ounce, usually move inversely to the greenback. AngloGold Ashanti Ltd. yesterday said it eliminated the last of its hedge book to give it full exposure to gold prices.
“It’s mostly driven by profit-taking,” said Jesper Dannesboe, a senior commodity strategist at Societe Generale SA in London. “Gold was massively overbought” and a halt in the dollar’s slide and the AngloGold announcement may prompt some investor sales, he said.
Gold futures for December delivery lost $4.60, or 0.3 percent, to $1,330.40 an ounce at 8 a.m. on the Comex in New York. The metal is up 1 percent this week. Bullion for immediate delivery in London was 0.3 percent lower at $1,329.57 after reaching a record $1,364.77 yesterday.
Bullion fell to $1,330.50 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,345 at yesterday’s afternoon fixing. The recent rally had driven futures’ relative strength index, a gauge of whether a commodity is overbought or oversold, above 70, a sign to some analysts and traders who study technical charts that prices may be poised to drop.
Dollar Slides
The dollar today traded near the lowest level since 1995 against the yen on concern the Federal Reserve will debase its currency by stepping up purchases of government debt, and earlier fell against the euro before a report forecast to show the U.S. jobless rate rose. The dollar was last up 0.3 percent against the euro.
Gold, up 21 percent this year, is heading for its 10th consecutive annual gain, the longest winning streak since at least 1920 in London. Bullion has outperformed global equities, Treasuries and most industrial metals, prompting record investment in gold-backed exchange-traded products. The metal rallied as central banks and governments maintained low borrowing costs and spent trillions of dollars to stimulate economies.
The Fed has left its benchmark interest-rate target at a record low and pledged to take more steps to spur growth if necessary. The Bank of Japan this week cut borrowing costs for the first time since 2008 and set up a 5 trillion yen ($60 billion) fund to buy state bonds and other assets.
Hedging Cut Back
AngloGold, the world’s third-largest gold producer, eliminated so-called forward-sales agreements at a cost of $2.63 billion. Gold producers sometimes sell future output at fixed prices to secure loans. They can reduce hedges by buying back contracts, adding to demand.
De-hedging by AngloGold “should be one of the reasons for the sharp rise in gold prices” recently, Commerzbank AG analysts including Eugen Weinberg said today in a report. “As the buybacks have now ended, this demand component will be absent in future.”
Gold assets in ETPs declined 11.91 metric tons to 2,083.67 tons yesterday, according to data compiled by Bloomberg from 10 providers. That’s the biggest drop in two months. Holdings reached a record 2,097.01 tons on Sept. 30 and are up 16 percent this year.
The U.S. jobless rate rose to 9.7 percent in September from 9.6 percent last month, according to the median estimate of 83 economists surveyed by Bloomberg News. Overall payrolls dropped by 5,000, economists estimate.
Quantitative Easing
“Investors may be hesitant to enter new long positions ahead of the key U.S. non-farm payrolls report,” Phillip Futures analysts including Teoh Say Hwa wrote in a note today. “A persistently weak labor market will increase the likelihood of more quantitative easing by the Fed to boost the economy.”
Vietnam’s central bank allowed 10 gold traders to import the precious metal, online newswire VnExpress reported today, citing Governor Nguyen Van Giau. Vietnam’s central bank may allow businesses to import gold to “stabilize the market,” online newswire VnEconomy reported yesterday, citing Nguyen Quang Huy, head of the State Bank of Vietnam’s department for foreign-currency management.
Silver for December delivery in New York lost 0.3 percent to $22.515 an ounce, cutting its gain to 2.1 percent this week. The metal yesterday reached a 30-year high of $23.53.
Platinum for January delivery fell 1.2 percent to $1,684.60 an ounce, after touching $1,730 yesterday, the highest price since May 14. Palladium for December delivery was 1.5 percent lower at $578.50 after climbing to $606.25 yesterday, the highest price since June 2001.
--With assistance Sungwoo Park in Seoul, Timothy R. Homan in Washington and Glenys Sim, Jan Dahinten and Alan Soughley in Singapore. Editors: John Deane, Claudia Carpenter.
To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net.
To contact the editor responsible for this story: Carpenter at ccarpenter2@bloomberg.net.
