SF: Gold Slumps Below $1,700 as Investors Sell to Cover Asset Losses
Sept. 23 (Bloomberg) -- Gold declined below $1,700 an ounce in New York and headed for the biggest weekly drop since 2008 as some investors sold the metal to cover losses in other assets. Silver slid.
Commodities plunged this week on concern that policy makers are running out of tools to avert another global recession. More than $3.4 trillion has been erased from equity values this week, driving the MSCI All-Country World Index of shares into a bear market. Central bankers and finance ministers will discuss the outlook today at the annual meetings of the International Monetary Fund and World Bank in Washington.
"We view the correction in gold as being temporary and similar to initial losses suffered in 2008, whereby the need to meet margin requirements elsewhere weighed on prices," Suki Cooper, an analyst at Barclays Capital in New York, wrote today in a report. Concerns about the economy and low interest rates will "continue to paint a fertile backdrop for gold."
Gold for December delivery fell as much as $50.70, or 2.9 percent, to $1,691 an ounce, the lowest price since Aug. 8, and was at $1,694.10 by 8 a.m. on the Comex in New York. The metal is down 6.7 percent this week, the biggest drop since December 2008, and set a record $1,923.70 on Sept. 6. Immediate-delivery gold was down 2.8 percent at $1,692.07 in London.
Gold futures' relative strength index has fallen to about 38.3. The gauge slipped to about 30 for silver, platinum and palladium today, a signal to some investors who study technical charts that prices may be set to rebound.
Bullion is in the 11th year of a bull market, the longest winning streak since at least 1920 in London, as investors seek to diversify away from equities and some currencies. The metal is up 19 percent this year, outperforming global stocks, commodities and Treasuries.
Budget Cuts
European Central Bank Governing Council member Klaas Knot said he no longer excludes a Greek default, Het Financieele Dagblad reported, citing an interview. The nation accelerated budget cuts to qualify for next month's payment under a 110 billion-euro ($149 billion) international bailout. Moody's Investors Service today downgraded eight Greek banks.
"The confidence-seeping sentiment that now permeates at a deeper level will at some point translate into a higher gold price," Edel Tully, a London-based analyst at UBS AG, wrote today in a report. "In these volatile times, gold's journey is not going to be a smooth one."
Silver Slumps
Silver for December delivery plunged as much as 12 percent to $32.37 an ounce in New York, the lowest price since May 12. It was last at $32.575 and slid 17 percent this week, the most in more than four months. Holdings of the metal in ETPs are down 57.9 tons this week.
"This and the latest price trend show that silver is still not regarded as a safe haven, but rather as a precious metal with an industrial character," Commerzbank AG analysts including Daniel Briesemann in Frankfurt wrote today in a report. "While strong hands will soon take over the helm in the case of gold, silver could remain under pressure."
Platinum for October delivery dropped 4.3 percent to $1,637.10 an ounce, after touching $1,635.20, the lowest since Nov. 29. Palladium for December delivery was 3 percent lower at $644.20 an ounce. It earlier today fell to $641.75, the lowest level since Nov. 17.
