By Carla Mozee, MarketWatch
MADRID (MarketWatch) — Gold prices touched one-week highs before backing off, putting a fourth winning session in jeopardy as the market tries to battle back from a massive selloff. Copper, meanwhile, remained weak.
Gold gained during Asian trading hours, but then began pulling back as Europe markets swung into action. Gold for June delivery GCM3 -0.42% fell $5.30, or 0.4%, to $1,415.70 an ounce. In Asian trading, gold reached $1,426.40 an ounce, its highest level since April 12, according to FactSet data.
Prices for gold on Monday marked their third consecutive session of advances, rising $25.60, or 1.8%, to $1,421.20 an ounce on the Comex division of the New York Mercantile Exchange. The gain came as figures from the Commodity Futures Trading Commission’s Commitments of Traders report suggested big traders, including hedge funds and commodity trading advisors, reduced their bets for a fall in gold prices.
Gold prices last week lost 7%, and face a drop of roughly 11% in April.
“At the very least, a sharp rebound based on short covering and physical buying should be expected once the panic has run its course,” John Hathaway, manager of the Tocqueville Gold Fund TGLDX +1.87% , said in a report about the recent fall in gold prices. “The bigger consideration is whether the validity of the rationale for gold has changed.”
Analysts have attributed a number of factors to the drop in gold prices, including declines in gold holdings among exchange-traded funds, worries that central banks will start selling gold reserves, and a lowered gold price from big investment banks like Goldman Sachs.
Hathaway said rationale for holding gold, including money printing by central banks and negative real interest rates, remains intact.
“Europe continues to be in a no-growth mode, the U.S. is experiencing slowing growth and China’s growth is weakening,” wrote Hathaway. “Under stagnant growth scenarios, sovereign debt burdens don’t go away and politicians may become tempted to seek inflationary measures to lessen the impact.”
On Tuesday, data from HSBC showed Chinese manufacturing-activity growth slowed in April. The preliminary or “flash” version of HSBC’s manufacturing Purchasing Managers’ Index fell to a two-month low of 50.5 from March’s final reading of 51.6. The April result was well below a Bloomberg forecast of 51.5.
Citing China concerns and bearish indicators, Goldman Sachs on Monday cut its three-, six- and 12-month copper forecasts following a heavy selloff over the past two months. May copper futures HGK3 -1.57% on Tuesday fell 4 cents, or 1.2%, to $3.09 a pound, extending Monday’s loss of 0.6%.
May silver SIK3 -2.50% futures fell 57 cents, or 2.4%, to trade at $22.77 an ounce, cutting into its gain on Monday of 1.6%.
July platinum futures PLN3 -1.29% gave up $11.70, or 0.8%, to $1,425.10 an ounce and palladium for June delivery PAM3 -1.56% fell $10.20, or 1.5%, to $671.70 an ounce, erasing Monday’s advance.
