Gold slides in London

Gold fell by nearly 1 percent on Monday, following its best weekly performance in a month, after Japan's intervention in the currency market triggered a spike in the dollar, which was already benefiting from ongoing concern about the eurozone. Japan intervened unilaterally in the foreign exchange market on Monday to curb the yen's strength, sending the dollar up more than 1 percent against a basket of currencies.
A stronger US currency makes dollar-denominated commodities more expensive for non-US buyers, pushing down the price of silver, copper and crude oil. Helping gold recover some of the day's losses was the New York Federal Reserve's decision to suspend conducting business with troubled brokerage MF Global, which scrambled over the weekend to find buyers for all or part of the company and hired bankruptcy and restructuring advisers.
Spot gold was down by 0.9 percent at $1,723.60 an ounce at 1514 GMT, having risen 6.0 percent last week and set for a 5.8 percent rise this month, following the near-11 percent slide seen in September, when prices hit a record $1,920.30. "MF Global was not a big surprise. Clearly it's not a bank, it's not on the scale of Lehman Brothers, but that is what helped the (gold) market to bounce off today's lows," said VTB Capital analyst Andrey Kryuchenkov. "Gold is trading a bit with the stock market and this euphoria over the (euro zone) bailout will run out of steam very quickly as people are starting to digest it and look for more details."
This week is set to be dominated by major US data, including monthly employment and several measures of manufacturing, along with Chinese factory activity, which also kept investors cautious. "I didn't buy the story last week of gold trading like a safe-haven again. But gold often trades in line with the other commodities .with(quantitative easing) and inflation and those kinds of things obviously supporting the price of both," said Mitsubishi analyst Matthew Turner.
"This week, it's all about the economic data and central bank policy meetings. There's no real sense of direction, except for the fact that it is trading more like a risk asset." The US Federal Reserve and the European Central Bank meet this week to discuss monetary policy, while the Group of 20 most industrialised nations meet in the French city of Cannes to devise a plan to stabilise markets.
The correlation between gold and the European equity market rose to a multi-month high of nearly 50 percent, meaning gold was more likely to move in tandem with stocks, while gold's negative correlation to the dollar strengthened to -40 percent on Monday from around -30 percent last week. Buyers in the physical market were on the sidelines, which led to gold bar premiums easing to a range between $1 to $1.50 an ounce over spot prices, from about $1.50 last week. "We saw some light buying from Thailand," said a Singapore-based dealer.
Investment interest in gold has been rekindled in recent weeks after eurozone leaders progressed towards an agreement to solve the bloc's debt crisis, albeit painstakingly, which pushed up the euro and as a result, helped send the gold price up 6 percent last week. Last week, money managers raised their bullish bets in gold futures and options to the highest in four weeks, according to data from the US Commodity Futures Trading Commission.
In exchange-traded fund flows, global holdings of gold ended last week with a 543,000-ounce inflow, the largest weekly increase since the week ending August 19. So far in October, global gold ETF holdings have risen by more than 714,000 ounces to their highest in five weeks at 67.769 million ounces. This would be the first monthly rise in holdings since July.
In the days ahead, investors will be watching a policy meeting of the US Federal Reserve, as well as a key Group of 20 meeting for co-ordinated efforts or pledges to help stabilise world financial markets. UBS strategist Edel Tully said the bank's auto analysts expected monthly US vehicles to pick up thanks to credit availability, improving inventories as well as other purchase incentives.
"Our conversations with producers and end-users in recent weeks have revealed end-user supply contracts remain unchanged, with metal shipments still being comfortably absorbed. The price decline in late September has in fact encouraged forward-buying, as a still rosy medium-term outlook made levels around $1,500 a good entry point," she said in a note. Platinum was last down 2.0 percent at $1,611.74, while palladium was down 1.4 percent at $653.97 and silver fell 2.2 percent to $34.47 an ounce.