BLBG:Gold Rebounds From Seven-Week Low as Europe Concerns Spur Investor Demand
Gold may rebound from a seven-week low in London as concern about Europe’s debt crisis spurs investors to buy the metal as a protection of wealth.
Gold slid 2.1 percent yesterday after the Federal Reserve said the U.S. economy is maintaining its expansion and refrained from taking new action to bolster the economy. The dollar was near an 11-month high versus the euro amid speculation the region’s sovereign-debt crisis is far from resolved. Gold holdings in exchange-traded products are at an all-time high.
“With the dollar pushing higher, that suggests the market remains nervous about Europe and the contagion it is causing,” William Adams, head of research at Basemetals.com in London, wrote in a report today. “Given the dire situation in Europe and stresses in the monetary system, we feel the big picture outlook for bullion remains bullish.”
Bullion for immediate delivery rose 23 cents to $1,631.80 an ounce by 11:10 a.m. in London. The metal touched $1,622.65 yesterday, the lowest price since Oct. 21. Gold for February delivery slipped 1.7 percent to $1,634.30 on the Comex in New York.
The metal fell to $1,635 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,672.50 at yesterday’s afternoon figure.
Bullion is up 15 percent this year and set for an 11th straight annual gain as investors seek to diversify away from equities and some currencies. Dennis Gartman, an economist who predicted the slump in commodities in 2008, yesterday said the metal may decline to $1,475, extending the drop from the record $1,921.15 set in September to more than 20 percent, the common definition of a bear market.
Moving Averages
Gold’s drop below its 100- and 50-day moving averages since last week took the metal’s 14-day relative-strength index to 33.6 yesterday, near a level of 30 that indicates to some analysts who study technical charts that a climb in prices may be imminent. Gold has traded above its 200-day moving average, now at about $1,619, since the beginning of 2009.
German Chancellor Angela Merkel told coalition lawmakers the 500 billion-euro ($652 billion) cap on Europe’s planned permanent bailout mechanism will stay in place, two officials with knowledge of the discussion said. The Fed yesterday said the U.S. economy continues to expand even as the global economy slows.
“If you’re a gold investor now, you’re torn between two worlds: a recovering U.S. market and Europe falling to pieces,” Tom Price, an analyst at UBS AG, said from Sydney. Investors are “trying to weigh out which one actually dominates the gold price, and for at least the next week, the gold price is going to struggle because of the improving U.S. market outlook.”
Gold holdings in exchange-traded products rose 0.2 metric ton to an all-time high of 2,360.7 tons yesterday, according to data compiled by Bloomberg. Assets jumped 84.8 tons last month, the most since July.
Silver for immediate delivery fell 0.9 percent to $30.49 an ounce. Palladium declined 0.8 percent to $639.50 an ounce. Platinum was down 0.6 percent at $1,465.75 an ounce.
To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net
