Gold fell over 1 percent in choppy trade on Tuesday afternoon, ignoring the weaker dollar that has supported the metal in recent sessions. Many analysts and traders had been calling for a short-term correction after bullion prices had galloped to their highest in nine months.
Expectations were still for the market to try for $700 an ounce in the near future as firmer oil prices, the weak dollar and geopolitical tensions were generally seen as supportive. Spot gold slid to $676.60/677.35 by 1553 GMT, down from $686.10/686.80 late in New York.
Gold had rallied to a nine-month peak of $689 on Monday, representing a gain of over 14 percent from its lows at the start of the year. The metal hit a 26-year high of $730 in May 2006. "The market looks overbought as recent rises have been a bit too rapid. Short-term players, who are keen to lock in their profits, are doing so now," said Akira Doi, director at Daiichi Commodities Co Ltd.
"All the focus is on whether cash gold could touch $700. Sentiment for commodities as a whole is strong as funds are shifting broadly into oil and copper," he said. Other financial markets were shaken by a sharp fall in Chinese stocks overnight.
Traders said that news did not have a direct impact on gold, although weaker base metals and a brief retreat in oil prices did not help sentiment. Others said gold had already been vulnerable to a sell-off given the speed of recent gains.
"The weakness in world stock markets is probably a double edged sword for gold. On the one hand, falling stock prices should make gold more attractive as a store of value and safe haven," Dresdner Kleinwort Wasserstein said in a note.
"As gold rose also on hopes of stronger physical buying from China, the collapsing stock market there might also reduce the potential demand for gold from China."
Some said the unwinding of yen-funded high-yield bets had also had a negative impact on gold. Gold took almost no notice of economic data from the United States that initially pushed the dollar to fresh two-month lows against the euro.
"Our technical analysts still forecast upside risk in the longer run but view the momentum extremes as a concern and are watching for evidence of a short term correction this week," Barclays Capital said in a daily report. Tensions surrounding Iran's nuclear ambitions would certainly discourage any aggressive selling of gold, often seen by investors as a haven.
Iran said on Tuesday it would never suspend uranium enrichment as demanded by the West, a day after world powers agreed to work on a new UN resolution to pressure Tehran to back down over its nuclear programme. Silver fell to $14.30/14.40 an ounce from $14.67/14.72 late in New York and off Monday's nine-month high of $14.72. Platinum ignored weakness in gold and gained to $1,241/1,246 from $1,235/1,240 an ounce. Palladium slipped to $349/353 from $353.50/357.50 an ounce.
Comments
Comments are closed.