Gold and platinum prices steadied in Europe on Tuesday as weakness in US stock markets curbed gains made by the dollar after China tightened monetary policy, a move seen as a precursor to higher interest rates. Spot gold recovered from a session low of $1,144.00 an ounce to $1,152.60 an ounce at 1546 GMT versus $1,151.10 late in New York trade on Monday.
China's announcement that it was raising banks' reserve requirements by 0.5 percentage points - the clearest sign yet it has begun to tighten monetary policy - initially lifted the dollar and cut the appeal of non-interest bearing precious metals. The move, which analysts say is a response to concerns parts of the economy may be overheating, suggests that policymakers there are focusing on inflation.
A rise in interest rates, while seen by few as imminent, is nonetheless "the next natural move", according to one analyst. US rates slumped to historic lows in the fallout of the global economic slump triggered in 2007. "Gold doesn't like real interest-rate environments which are very high and positive because it is a non-interest bearing asset," said Michael Lewis, head of commodities research at Deutsche Bank.
Gold often acts as a hedge against inflation for some investors, but at the same time its lack of yield makes it unattractive in an environment of rising interest rates. Platinum was at $1,594.50 an ounce against $1,591.50, off a low of $1,571 it hit after the China news. Earlier it reached $1,624, its highest since August 2008, while palladium hit an 18-month high of $439. It was later at $434 against $431.
Platinum and palladium prices jumped to their highest since mid-2008 earlier on Tuesday as the launch of new investment products in the United States and hopes for a recovery in industrial demand fuelled buying. "We have a new player on the market, and that is the new palladium and platinum ETFs being traded in the United States," said Commerzbank analyst Eugen Weinberg. "We have seen strong demand for them in the first two days of trading." Silver was at $18.56 an ounce against $18.55.
Comments
Comments are closed.