Gold, little changed in London today, may decline as a stronger dollar and lower oil prices curb the metal’s appeal as an alternative investment and hedge against inflation. Silver dropped.
Gold is heading for the biggest weekly decline in five. The metal, which typically moves inversely to the greenback, has lost 2,5% this week as the dollar has added 0,6% against the euro. Crude oil, heading for a fourth weekly decline, yesterday touched the lowest since May 19.
“Certainly the shock drop in oil has reminded people that inflation is not a big threat right now,” Standard Chartered Plc analyst Dan Smith said. “The correlation with the dollar is still pretty high.”
Bullion for immediate delivery fell $3,16, or 0,4%, to $909,19 an ounce by at noon in London, poised for a fifth weekly decline in six. August gold futures dropped 0,8% to $908,80 an ounce on the New York Mercantile Exchange’s Comex division.
The metal slipped to $910 in the morning “fixing” in London, used by some mining companies to sell production, from $911,75 at yesterday’s afternoon fixing. Twenty-one of 32 traders, investors and analysts surveyed by Bloomberg News said gold will fall next week. Five forecast higher prices and six were neutral.
The dollar gained as much as 1% against the euro. Crude oil, used by some investors as an indicator of the outlook for inflation, is heading for its biggest weekly decline since January on concern a prolonged global recession will sap demand for energy. The fuel, down 11% this week, slipped as much as 1,5% to $59,52 a barrel in New York today.
“Liquidation of long positions by fund managers also accelerated the decline after gold broke below technical support at $915” an ounce, Pradeep Unni, a Richcomm Global Services analyst in Dubai, wrote today in a report. “Every rally has been repeatedly utilized as an opportunity to sell higher.”
Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, was unchanged at $1109,81 tons, the company’s website showed. The fund fell by $10,38 tons on July 8, the most since April.
“The scale of buying interest toward $900 an ounce is encouraging, but with tame inflation readings and ETF and jewelry demand still slack, we maintain our bearish short-term outlook,” James Moore, an analyst at TheBullionDesk.com in London, wrote in a note.
