Gold heads for worst weekly fall since March

Friday, 11 May 2012 09:36

Posted by Shoaib-ur-Rehman Siddiqui

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SINGAPORE: Gold slipped more than half a percent on Friday, heading for its worst weekly fall since March on weaker euro and equities, as investors failed to shake off worries about Europe's debt crisis threatening global economic growth.

Gold, though traditionally seen as a safe haven, bore the brunt of the sell-offs across risk assets such as equities, industrial metals and oil this week, forcing investors and speculators to sell bullion to cover losses in other markets.

Gold eased $6.72 an ounce to $1,587.01 by 0257 GMT

after shares in Asia were hit by JPMorgan's $2 billion loss from a failed hedging strategy and by political turmoil in the euro zone.

"We are still uncertain about what's happening out of the euro zone. For now, I think gold will trade largely like a risk asset and probably tracking equities as well. Support level is about $1,500."

"The increase we saw yesterday was a bit of bargain hunting from a three-day of losing streak," said Lynette Tan, an analyst with Phillip Futures in Singapore.

US gold for June delivery fell $8.20 to $1,587.30 an ounce, having briefly risen above $1,600 on Thursday.

MSCI's broadest index of Asia-Pacific shares outside Japan dropped to its lowest since January, with risk appetite still largely muted due to heightening political and policy uncertainty in the euro zone.

Investors had turned to gold as a safe haven from risk during the debt crisis last year, sending prices to an all time high around $1,920 an ounce. But this year, bullion is trading more in line as a commodity that moves in the opposite direction to the US dollar.

The euro plunged to a 3-1/2 month low on Friday as the single currency smarted from political deadlock in Greece that has left investors worried about the risk of the country exiting the euro zone.

 European Union paymaster Germany warned Greece on Thursday that European partners could only go on aiding debt-ridden Athens if it sticks to an international bailout programme rejected by voters in a general election.

 Bullion dealers shrugged off China's inflation data as investors attention remained firmly fixed on the debt ciris in Europe.

China's annual consumer inflation moderated in April despite strong food price rises, which could potentially give Beijing more scope to loosen policy to help the economy rebound from a first-quarter slowdown in growth.

"There's a small amount of selling of gold after we failed to stay above $1,600 last night. Gold is heading south for the time being. The economy in the euro zone is very bad, and people are rushing to buy the US dollar," said a dealer in Hong Kong

"Let's see if gold eventually breaks $1,580."

In the energy market, oil futures slipped on Friday as OPEC members pumped above the group's target in April and amid an uncertain global economic outlook as Europe struggles to tackle the region's debt crisis.