MW: Gold hews to tight range on global growth worries
Platinum and palladium futures show biggest percentage drops
By Myra P. Saefong and V. Phani Kumar, MarketWatch
SAN FRANCISCO (MarketWatch) — Gold futures stuck to a tight trading range on Wednesday as concerns about the euro zone and, in turn, the health of the global economy constrained buyers.
Gold for December delivery GCZ2 +0.16% was down $1.90, or 0.1%, to $1,763 an ounce on the Comex division of the New York Mercantile Exchange.
The yellow metal’s most actively traded contract, which has lost ground for three consecutive days after hitting an intraday high of $1,796.50 on Thursday, held to a narrow range between $1,770 and $1,758.50.
“With Euro policy makers back to jawboning, not acting, and without a major central-bank decision until the [Federal Reserve] on Oct. 24, gold is looking listless at present,” said Adrian Ash, head of research at BullionVault. “It has already been stuck in a $40 range for almost four weeks now.”
In a report dated Wednesday, the International Monetary Fund said that if European governments fail to solve the euro-area crisis, the region’s banks could be forced to sell as much as $4.5 trillion of assets. The figure is up from the $3.8 trillion estimate the IMF made in April. See: IMF: Europe banks may have to shed $4.5 trillion of assets.
On Tuesday, gold futures dropped $10.70, or 0.6%.
“With the market stumbling in sight of $1,800 an ounce, we believe that the path of least resistance is lower, at least in the near term,” HSBC analysts, led by James Steel, wrote in a note to clients.
The analysts said that although bullish calls on gold had nearly doubled in the past two months and stockpiles at exchange-traded funds have risen to record levels, additional monetary-policy easing in the U.S. and other countries was no longer a sufficient catalyst.
“We do not anticipate further significant buying of gold based on monetary-policy accommodation alone. In this light, the bullion market price could drop to $1,750 an ounce or lower in the near term,” they added.
Market indicators
Also in a research note Wednesday, analysts at Commerzbank said they don’t foresee any prolonged downswing in gold, “as this should be precluded in particular by continued inflows into the gold” exchange-traded funds.
“Over the past two days, ETF holdings have risen by a further 13 tons, 191 tons of gold having flowed into ETFs since the end of July,” said the analysts at Commerzbank. The bigger ETF interest in gold stems from ultra-loose central bank monetary policy, driving fears of reduced purchasing power, and currency devaluation.
The euro-zone crisis remains a dominant theme as well, as Spain so far refuses to seek help, and recently the International Monetary Fund also voiced concern about continuing capital flight from euro-zone peripheral countries.
“Against this backdrop, the gold price remains well supported,” said the Commerzbank analysts.
The ICE dollar index DXY -0.17% , which measures the greenback against a basket of six major global currencies, rose to 79.989 from 79.973 in North America late on Tuesday.
A stronger U.S. dollar tends to pressure prices for gold and other dollar-denominated commodities.
Other metals were also lower.
December futures for silver SIZ2 +0.50% shed 3 cents, or 0.1% to $33.96 an ounce. For palladium PAZ2 -0.49% delivered that month, futures fell $7.95, or 1.2%, to $650.25 an ounce.
Platinum futures for delivery in January PLF3 -0.56% fell $21.30, or 1.3%, to $1,674 an ounce.
December copper HGZ2 +0.27% eased by less than a penny, or 0.2%, to $3.71 a pound.
Myra Saefong is a MarketWatch reporter based in San Francisco.
Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau. Barbara Kollmeyer in Madrid contributed to this report.
