Gold Falls, Extending Drop as Some Investors Sell After Rally
May 20 (Bloomberg) -- Gold fell in London, extending the biggest drop in more than three months, as some investors sold the metal after its rally to a record last week. Platinum and palladium fell to the lowest levels in almost three months.
Gold slumped 2.6 percent yesterday as commodities and equities dropped, prompting speculation that some investors sold bullion to cover losses in other assets. The euro failed to extend yesterday’s rally against the dollar on concern that European governments are divided on how to contain the impact of the region’s sovereign-debt crisis.
“Gold may have further to correct short term, having pushed to just short of $1,250 last week and been overbought on the charts,” James Moore, an analyst at TheBullionDesk.com in London, said in a report. Still, “we expect investors who missed the boat the first time may view the current dip as a buying opportunity.”
Gold for immediate delivery lost as much as $11.40, or 1 percent, to $1,182.35 an ounce and traded at $1,185.50 at 11:53 a.m. in London. Yesterday’s drop was the biggest since Feb. 4. Bullion for June delivery was 0.6 percent lower at $1,185.40 on the Comex in New York.
Gold fell to $1,187.25 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $1,195 at yesterday’s afternoon fixing. Spot prices are heading for their first weekly decline in more than a month.
Preserving Wealth
Bullion rallied this quarter, touching a record $1,249.40 an ounce on May 14, as investors sought to protect their wealth amid Europe’s debt crisis. Gold’s 14-day relative-strength index, a measure of whether a commodity is overbought or oversold, last week climbed above the level of 70 viewed by some analysts as a signal that prices may fall. It was at about 49 today.
“People are reducing their long positions on metals,” said Paul Yamamura, a Tokyo-based trader at Sumitomo Corp., referring to bets on price gains. “Considering the volume in exchange-traded funds, gold could be vulnerable.”
Investors yesterday bought and sold 34.4 million shares of the SPDR Gold Trust, the biggest ETF backed by bullion, data compiled by Bloomberg shows. That compares with a daily average of about 19.5 million shares in the past six months.
SPDR Holdings
Gold holdings in the SPDR Gold Trust increased 3.04 metric tons to a record 1,220.15 tons yesterday, according to the company’s website. Gold held in ETF Securities Ltd.’s European and Australian products climbed 1.2 percent to a record 8.541 million ounces yesterday. Silver holdings also reached a record.
Precious metals and other commodities dropped yesterday as global equities retreated after Germany announced a ban on making some bets against government bonds and financial institutions. The country’s chancellor and finance minister will host talks on financial regulation today in Berlin before a Group of 20 summit next month in Canada.
“The megatrend is still up, but the market needs to go through some minor correction,” said Wallace Ng, executive director at Fortis Nederland NV in Hong Kong. “We will see more profit-taking on recent gains.”
Gold will likely rise further as investors, concerned that European monetary expansion will spur inflation, seek a haven, Aram Shishmanian, chief executive officer of the producer-funded World Gold Council, said yesterday in an interview in Lima, Peru. Gold will also climb as supply fails to meet growing demand from ETFs and the jewelry and nanotechnology industries, he said.
Silver for immediate delivery fell as much as 1.8 percent to $17.8925 an ounce, the lowest price in almost two weeks, and was last at $17.975. Platinum slipped as much as 4.7 percent to $1,526.75 an ounce, the lowest level since Feb. 26, and last traded at $1,536.25. Palladium slid as much as 7.6 percent to $424.50 an ounce, also the lowest price since Feb. 26, and was last at $425.
