Emerging-market demand seen increasing amid lower prices
By Claudia Assis and Simon Kennedy, MarketWatch
SAN FRANCISCO (MarketWatch) — Gold futures tilted lower after swinging between small gains and losses Wednesday, with traders mostly on the sidelines following steep losses for metals in recent days and a rebound the previous session.
Gold for December delivery GC1Z -1.61% lost $15.90, or 1%, to trade at $1,636.30 an ounce on the Comex division of the New York Mercantile Exchange.
Gold snapped a four-day losing streak on Tuesday, settling 3.6% higher as an end for a broad-based equities selloff stanched money flows out of gold and other commodities.
“After the rally, you are seeing some profit-taking,” said Stephen Platt, an analyst with Archer Financial Services in Chicago. “People are shedding some risk after the volatility they’ve seen.”
December silver SI1Z -3.75% tracked gold lower, down 54 cents, or 1.7%, to $30.96 an ounce.
Both gold and silver suffered big losses last week, including the gold contract’s worst day in five years on Friday, as traders sold precious metals to raise cash.
The losses were followed by a rebound Tuesday amid hopes that European leaders were making progress in addressing the euro zone’s sovereign-debt crisis.
“People were tired of the volatility. We all need some time to clean up messes,” Platt said.
Despite the sharp drop for gold in the last week, redemptions from gold exchange-traded funds have been light, said Shamin Mansoor, analyst at Daniel Stewart.
On top of that, lower prices also appear to be bringing back emerging-market buyers, he said in a note to clients.
Commerzbank analysts also weighed in, saying the price fall is driving increased buying of physical gold particularly in India, where a holiday season during which gold buying is considered auspicious is about to begin.
“Demand is reported to be high and some local traders are already speaking of supply bottlenecks,” wrote Eugen Weinberg, Commerzbank’s head of commodity research, in a note.
In addition, Commerzbank highlighted that European central banks could soon join their emerging-market counterparts as net buyers of gold.
In the second fiscal year of the current Central Bank Gold Agreement, which ended Monday, European central banks sold just 1.1 tons of gold. The annual figure has now fallen sharply for four straight years.
“The price of gold should be well supported on this front in the medium to long term,” Commerzbank said.
Other metals also traded lower, with December copper HG1Z -6.02% down 15 cents, or 4.4%, to $3.29 a pound.
Claudia Assis is a San Francisco-based reporter for MarketWatch.
Simon Kennedy is the City correspondent for MarketWatch in London.
