Friday 2 December 2016

Gold may decline on signs economic recovery is stalling

Published 20/07/2010 | 11:28

Gold prices, little changed, may drop for a fifth session as concerns that the global economic recovery may be slowing damped demand for the metal used in industrial goods as well as jewelry.

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Ireland’s credit rating was downgraded yesterday by Moody’s Investors Service, which cited a "significant loss of financial strength" and the cost of bank bailouts.

The precious metal has dropped 6.5pc from a record $1,265.30 an ounce on June 21.

The euro has fallen 9.5pc versus the dollar this year on concern that widening budget deficit in countries including Ireland, Spain and Greece could lead to a default.

"IBM results were not good, the euro is weak and Ireland’s rating was downgraded," said Hwang Il Doo, a senior trader at Korea Exchange Bank Futures Co in Seoul.

"Almost half of all gold is for industrial use and recent industry-related data point to a possible slowdown in the economic recovery."

Gold for immediate delivery was little changed at $1,183.6 an ounce at 2:01pm Seoul time.

The price touched $1,177.47 yesterday, the lowest level for a most-active contract since May 24. Futures for August delivery were little changed at $1,183.20 on the Comex in New York.

International Business Machines, the world’s biggest computer-services company, reported yesterday revenue last quarter that missed analysts’ estimates and a drop in services- contract signings.

‘Safe asset’

"The merit of gold as a safe asset seems to be waning a bit recently. We still have to wait and see," said C.H. Oh, head of overseas futures at NH Investment & Futures in Seoul.

Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, were unchanged at 1,314.21 metric tons as of July 19, according to figures on its website.

US housing starts fell 2.7pc to a 577,000 annual rate in June, according to the median estimate of economists in a Bloomberg News survey before Commerce Department data today.

Hedge-fund managers and other large speculators trimmed their net-long positions, or bets on a rally in Comex gold futures, by 2pc to 204,921 contracts in the week ended July 13, according to government data. That marked the lowest level since April 6.

Immediate-delivery silver gained 0.5pc to $17.6800 an ounce. Platinum was 0.1pc lower at $1,511.25 an ounce, while palladium climbed 0.6pc to $447.25 an ounce.

Bloomberg

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