Market eyes Syria; silver erases most of Tuesday’s sharp advance
By Myra P. Saefong and Sara Sjolin, MarketWatch
SAN FRANCISCO (MarketWatch) — Gold futures dropped more than $20 an ounce on Wednesday with the market keeping watch on developments surrounding Syria, as silver handed back some of the previous session’s sharp gain.
Gold for December delivery GCZ3 -1.56% fell $21.40, or 1.5%, to $1,390.60 an ounce after rising 1.1% Tuesday on the Comex division of the New York Mercantile Exchange. If prices close around this level, they’ll mark their lowest settlement for a most-active contract since Aug. 22, FactSet data show.
“The move lower is counter-intuitive, what with growing concerns over a possible air strike on Syria, coupled with South Africa’s gold miners going on strike,” said Ross Norman, chief executive officer at Sharps Pixley. “What is more, there is plenty of scope for these geopolitical tensions to escalate ... and yet gold is off.”
In South Africa, a strike that among miners demanding more pay hit production at most gold mines on Wednesday, according to Reuters.
For gold, “our reading is that traders ‘buy the rumour, but sell the fact’ — this suggests the market has risen on the possibility of an air strike, and the sell-off is a confirmation that this is now an inevitability,” Norman said in emailed comments. “The move lower my have been compounded by some profit-taking given that it has had a pretty good run these last few weeks.”
Comex gold, based on the most-active contracts, climbed more than 6% in August. Read: Gold isn’t a slam dunk even with Syria worries.
Other metals dropped on Wednesday, with silver leading the way.
December silver SIZ3 -3.74% fell 91 cents, or 3.7%, to $23.53 an ounce, following a 3.9% jump in the previous session.
October platinum PLV3 -2.50% lost $38.30, or 2.5%, to $1,499.90 an ounce, while December palladium PAZ3 -2.21% dropped $15.75, or 2.2%, to $702.20 an ounce.
December copper HGZ3 -1.88% gave up 6 cents, or 1.9%, to $3.24 a pound.
Factoring in Syria
The Syrian conflict remained a key focus for the market, with reports late Tuesday saying leaders of the U.S. Senate Foreign Relations Committee had reached a deal on a bill to approve military action against the Syrian regime.
The likelihood of a U.S. strike on Syria appeared to grow Tuesday after House Speaker John Boehner said he would support President Barack Obama’s request to authorize a military strike.
The accord between the Republican Boehner and the Democratic White House suggested Congress may approve an attack on Syria, a move some analysts had doubted earlier in the week.
Speaking at a news conference with Sweden’s prime minister in Stockholm on Wednesday, Obama defended his position on Syria.
“We continue to expect higher prices in longer-term. Short-term the potential is limited, the headwinds are just too strong and physical demand does not seem to support the prices currently,” Eugen Weinberg, commodity analyst at Commerzbank, said in a note.
HSBC analysts said that while “the potential for Mideast tensions to intensify would be bullish for bullion,” the gains would depend on a concurrent rise in oil prices.
“A key reason for gold to rally in response to Mideast tensions is the potential for oil-supply disruptions that a U.S. strike or an escalation of the conflict may trigger,” they wrote late Tuesday.
“In order for gold to build on recent gains over $1,400/ounce, oil prices also have to remain strong, we believe. A relaxation in oil prices — for whatever reason — could also undermine gold,” they said.
Oil prices moved lower on Wednesday.
Gold investors were also looking ahead to Friday’s U.S. jobs report for signs of whether it will push the Federal Reserve closer to tapering its $85-billion-a-month asset purchases. Many economists believe the central bank could start scaling back its easing program as soon as September or October after recent solid data, and a strong jobs report could further add to those expectations.
Aggressive monetary easing tends to be friendly for commodities, and a reduction in asset purchases is seen as boosting the dollar and adding further pressure on gold prices.
Myra Saefong is a MarketWatch reporter based in San Francisco. Follow her on Twitter @MktwSaefong.
Sara Sjolin is a MarketWatch reporter based in London. Follow her on Twitter @sarasjolin. Michael Kitchen in Los Angeles contributed to this report.
