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Gold, which fell below the $1,800 support level on Thursday, remained weak, taking its cue from the rise in the dollar in European Friday morning trading.
Bullion declined 0.7 per cent to $1,776.09 a troy ounce, suffering from the lack of buying interest that usually emerges in Asia. Thursday’s intervention by central banks to provide dollar lending to European banks restored confidence in financial markets, and reduced the sense of risk which has been supporting the yellow metal, as well as increasing uncertainty over the need for further quantitative easing.
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The rise in US core inflation released on Thursday also spooked investors looking for signs of more liquidity from the Federal Reserve which would have provided an overall boost for financial markets.
The report on gold released by GFMS, the precious metals consultancy, highlighted the strong demand for physical bars, with physical bar investment rising 43 per cent in the first half of 2011 led by India and China.
While demand from Europe fell by a small amount in the first half, the consultancy noted a strong rebound in demand for bars with the Greek debt crisis re-emerging in June, with bar demand remaining “at healthy levels in the summer on the back of growing fears that the threat of debt contagion may spread to Italy and Spain”.
Although some Europeans were buying gold bars, many in southern Europe were selling their jewellery, said GFMS. Global scrap supply fell by 7 per cent, but in Europe, it rose by 6 per cent with southern Europe seeing double digit gains. The move reflected “a troubled economy and a deeper pool of higher carat jewellery” as people in Italy and Spain sold their gold chains to supplement their income.
Elsewhere in commodities markets, based metals gained ground with copper up 0.4 per cent $8,780 and aluminium up 0.2 per cent to $2,383.75. Crude oil was mixed, with the November ICE Brent up 78 cents to $113.08 in tandem with stock markets, while Nymex October West Texas Intermediate eased $0.01 to $89.39.
Glencore shares rose 2.6 per cent to 448.65p. The trading group said its chief executive Ivan Glasenberg spent almost £10m, buying 2.25m shares at 435.02p.
