BLBG: Gold May Decline in London Trading as ETF Holdings Drop to a 1-Month Low
Gold may decline in London after holdings in exchange-traded funds dropped to the lowest level in more than a month as investors sold bullion to cover losses in other markets.
Holdings in bullion-backed ETFs, which reached an all-time high of 2,360.81 metric tons on Dec. 14, fell for a fifth day to 2,329.921 tons yesterday, data compiled by Bloomberg show. Price declines may be limited as the euro advanced against the dollar, and bullion’s correlation with the 17-nation currency is the highest since November 2010.
“Declines in ETF holdings may affect the price in the short-term,” Colin Hamilton, a London-based analyst at Macquarie Group Ltd., said in an interview. “Yet, gold continues to trade along with the euro.”
Gold for immediate delivery was little changed at $1,615.44 an ounce by 10:01 a.m. in London. The February-delivery contract gained 0.2 percent to $1,616.60 on the Comex in New York.
“Despite all the uncertainty in Europe we are not witnessing a credit event just yet,” Andrey Kryuchenkov, a London-based analyst at VTB Capital said in a report today. “Policy makers are constantly seeking to boost market sentiment and the euro’s credibility.”
The euro rose as much as 0.6 percent today against the dollar. The 30-day correlation coefficient between gold and the euro is at 0.65, compared with minus 0.35 on Oct. 7, data compiled by Bloomberg show. That’s the highest since Nov. 3, 2010. A figure of minus 1 means the two tend to move in opposite directions, and 1 means they move in lockstep.
European Banks
European banks borrowed a record 489 billion euros ($641 billion) from the European Central Bank yesterday, more than economists’ median estimate of 293 billion euros in a Bloomberg News survey.
Gold, up 14 percent this year, is still set to recover from its worst week in almost three months. Prices dropped 6.6 percent last week, and touched $1,560.97 on Dec. 15, the lowest price since Sept. 26, after the Federal Reserve refrained from taking new action to boost economic growth. Bullion is up 1 percent this week.
Spot silver rose 0.5 percent to $29.5475 an ounce. It’s down 4.4 percent this year.
Platinum for immediate delivery fell 0.1 percent to $1,427 an ounce, extending this year’s loss to 19 percent. Palladium, down 21 percent this year, fell for the first day in three, dropping 0.4 percent to $632 an ounce.
To contact the reporter on this story: Maria Kolesnikova in London at mkolesnikova@bloomberg.net
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net
