But lower prices may boost investor demand, analyst says
TOKYO (MarketWatch) — Gold futures fell by as much as $7 an ounce on Tuesday, as gains in the U.S. dollar against some foreign currencies helped dull investor interest in the precious metal.
Gold for December delivery (GCZ10 1,366, -5.90, -0.43%) touched a low of $1,365.10 an ounce in electronic trading on Globex. The contract has since recouped some of its losses to trade at $1,366.50, down $5.60 in Tokyo’s afternoon dealings.
“There is a lack of fresh news to start another big rally in gold,” said Chintan Karnani, chief analyst at Insignia Consultants. Gold “seems to be [in] a consolidation phase for now.”
But “at lower prices, there will be higher investor demand [for] gold and physical demand of gold in India and other parts of the world will rise as long as gold trades over $1,345,” he said.
If gold falls below $1,345, investment and physical demand will “vanish,” he said, “and we could see another wave of selling below $1,345 to $1,313.”
December gold closed at $1,372.10 in New York Monday, up 10 cents for the session. See Monday’s gold column.
In related news Tuesday, the Financial Times reported that South Korea is considering buying gold to diversify its foreign-exchange reserves. Seoul, which holds about 63% of its reserves in U.S. dollars, is believed to have shifted its official skepticism towards bullion at a time when other central banks in Asia are stocking up on gold amid concerns over the weak dollar, the report said. Read more about Korea’s potential gold purchase.
Traders, however, have become increasingly concerned that gold may be overbought after its recent rally, which marked, on Thursday, 17 record closing highs in a little more than five weeks.
“Confidence is waning about the sustainability of this rally and in the short term, there may be a pullback,” said Mark O’Byrne, director at GoldCore, in recent comments. “As ever it is wise and prudent to focus on the long term in order to protect, preserve and grow wealth.” Read a Commodities Corner column on potential scenarios that would fuel a retreat in gold.
