BLBG:Gold Declines as European Debt Crisis, Kim’s Death Strengthen the Dollar
Gold declined, extending the worst weekly loss since September, as concern that Europe’s sovereign- debt crisis may be worsening and the death of North Korean leader Kim Jong Il boosted the dollar.
Cash gold fell as much as 1 percent to $1,583.57 an ounce, and traded at $1,589.13 by 2:11 p.m. in Singapore. Immediate- delivery bullion tumbled 6.6 percent last week as the dollar rallied 2.6 percent against the euro. The February-delivery contract lost as much as 0.8 percent to $1,585.50 on the Comex.
The dollar strengthened against the majority of its 16 counterparts after Kim’s death was announced by North Korea’s state media today. It traded near an 11-month high against the euro after Fitch Ratings cut its outlook for France’s credit rating, and said it may reduce Spain’s grade. Gold has advanced 12 percent this year as the debt crisis fanned haven demand.
“Gold has come under pressure from the dollar, which is benefiting from the news of Kim Jong Il’s passing,” said Wei Chishan, an analyst at Shanghai Metals Market. “Geopolitical uncertainty in the short term may spur some haven buying but this is unlikely to have any large or lasting impact.”
Spot gold slumped to $1,560.97 on Dec. 15, the lowest price since Sept. 26, and 19 percent below the Sept. 6 record of $1,921.15. Holdings in bullion-backed exchange-traded funds, which reached an all-time high of 2,360.810 metric tons on Dec. 14, fell for a second day to 2,346.248 tons on Dec. 16, according to data compiled by Bloomberg.
“Gold is still an attractive investment, and while a stronger dollar will cap gains, prices should remain supported as there are many buyers looking out for a bargain,” said Tao Jinfeng, chief investment consultant at Haitong Futures Co., China’s largest brokerage by registered capital.
‘Biggest Beneficiary’
Kim died on Dec. 17, the nation’s state media said today. A government statement called on North Koreans to “loyally follow” his son, Kim Jong Un.
“The dollar will be the biggest beneficiary,” said Koji Fukaya, chief currency strategist in Tokyo at Credit Suisse Group AG. “Because of increased uncertainty, it’s cause for risk aversion.”
Spot silver fell for the first day in three, dropping as much as 3.4 percent to $28.72 an ounce before trading at $28.78. The price has dropped 6.9 percent this year.
Cash platinum declined 0.9 percent to $1,407.75 an ounce, extending this year’s loss to 20 percent. Palladium, down 23 percent this year, dropped 1.4 percent to $615.75 an ounce.
To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net
To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net
