Gold went against the flow of rebounding commodities markets on Wednesday, falling below the $1,600 support-level in volatile trading.
After a strong start in the beginning of the week, bullion fluctuated in New York trading on Tuesday, after a Financial Times report revealing a European support plan for the region’s banks suffering from the effects of the sovereign debt crisis brought it and equities up sharply off session-lows.
However, the yellow metal lost ground once again during Wednesday European morning trading, falling 1.3 per cent to $1,598.50 a troy ounce. Its volatility – moving with so-called “risk assets” such as equities and industrial metals one day, decoupling from them the next – is making commentary and analysis difficult for market participants following trading in precious metals.
Edel Tully, precious metals strategist at UBS, predicted that the volatile price movements were likely to continue. “Indeed, yesterday’s moves highlight the difficulty of making sense of the gold market in the current shaky environment,” she wrote in her daily note.
Copper, which hit a 14-month low at the start of the week, gained ground thanks to the European Union bank rescue proposals, with the red metal for three-month delivery on the London Metal Exchange rising 1.2 per cent to $6,885 a tonne.
Aluminium added 0.5 per cent to $2,185 a tonne for three-month delivery on the LME, while nickel rose 0.1 per cent to $18,628. Some metal executives believe that with the average cost of production for some of the high cost nickel producers at about $18,000 to $19,000 a tonne, a continued fluctuation of the metal at these levels could lead to cuts in production.
Crude oil also rebounded from earlier lows, with November ICE Brent, which briefly fell below the $100 support level, up $1.29 a barrel in European trading, and November Nymex West Texas Intermediate adding $1.73 a barrel to $77.40.
Mining stocks, which had tumbled earlier in the week on fears of a global recession as well as target price cuts by investment banks, found support. BHP Billiton, the largest miner, rose 4.1 per cent to £17.35, Rio Tinto added 4.4 per cent to £28.30, while Xstrata rose 4.4 per cent to 797.7p. Glencore, the trading house, added 1.1 per cent to 401.35p.
