BLBG: Gold May Fall in London as Some Investors Sell to Cover Losses
By Nicholas Larkin and Kim Kyoungwha
May 25 (Bloomberg) -- Gold, little changed in London, may decline as some investors sell the metal to cover losses on other assets. Platinum, palladium and silver all fell.
The euro slid against the dollar after the International Monetary Fund urged Spain to do more to overhaul its ailing banks, adding to speculation that European financial institutions may face greater losses. All six industrial metals on the London Metal Exchange dropped, as did oil and global equities. Holdings in the biggest gold-backed exchange-traded fund rose to a record.
Gold is “vulnerable to further cash-generating selling in the short-term given the volatile swings across the broader financial markets,” James Moore, an analyst at TheBullionDesk.com in London, wrote in a report. Increasing ETF holdings and coin and bar purchases continue to “highlight investor diversification towards safe-haven asset types and should limit the impact of long liquidation in gold.”
Gold for immediate delivery lost $3.40, or 0.3 percent, to $1,188.25 an ounce at 11:36 a.m. in London. Bullion for June delivery was 0.5 percent lower at $1,188.10 on the Comex in New York.
Gold rose to $1,189.50 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $1,187 at yesterday’s afternoon fixing. Spot prices are up 8.3 percent this year, heading for a 10th annual gain.
‘Under Pressure’
Spain’s banking industry “remains under pressure” as consolidation has been “too slow,” the Washington-based IMF said in a report yesterday after a regular review of Spain. Gold touched an all-time high of $1,249.40 an ounce on May 14 as investors sought a haven for their money on concern that the European debt crisis may worsen.
The decline may be temporary as “people are still skeptical about how the European crisis will develop,” said Wong Eng Soon, a Singapore-based investment analyst at Phillip Futures Pte Ltd.
The MSCI World Index of shares slipped to the lowest level since August 2009, while crude oil futures slid as much as 4.1 percent in New York and copper fell as much as 3 percent in London.
“We fear that commodity prices are about to come under very real pressure as a result” of a stronger dollar and falling equity markets, said Dennis Gartman, an economist and editor of the Suffolk, Virgina-based Gartman Letter. “This shall be especially true if the margin clerks begin to sharpen their knives as share prices weaken, for they will begin to look for any and all places from which to get liquidity.”
Korean Tensions
Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, increased 16.74 metric tons to a record 1,236.89 tons yesterday, according to the company’s website. Holdings have gained 9.1 percent this year.
North Korean leader Kim Jong Il told the country’s armed forces to get ready for “combat” in an order broadcast on May 20, the North Korea Intellectuals Solidarity group reported on its website. South Korea yesterday announced plans for joint anti-submarine exercises with the U.S. after the sinking of one of the South’s warships killed 46 sailors, an incident the government in Seoul has blamed on Kim’s regime. Some investors buy gold as a haven amid geo-political tensions.
Silver for immediate delivery fell 1.6 percent to $17.625 an ounce. Platinum dropped 3.1 percent to $1,482.35 an ounce and palladium slumped 5 percent to $426.25 an ounce.
To contact the reporters on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net.
