Gold extended losses after the US Treasury said it would support gold sales by the International Monetary Fund, which holds more than 3,000 tons of bullion.But the physical market was abuzz with activity as gold's fall attracted bargain hunters as well as purchases from jewelry makers, mainly from Indonesia and Vietnam.
Gold dropped to $930.20/931.00 an ounce from $937.80/938.60 an ounce late in New York on Monday, but remained within sight of last week's record high of $953.60 an ounce.
“In my opinion, the IMF gold sales will not push the price of gold down, but psychologically, it might,” said William Kwan, a dealer at Phillip Futures in Singapore.
The US Treasury had resisted seeking congressional approval for the gold sales until the move was tied to an IMF cost-cutting plan, and has enough votes in the Fund to block any sales.
The IMF is the world's third-largest gold holder, with 3,217.3 tons of bullion reserves. The last IMF gold sales in December 1999 and April 2000 were not put through the spot markets.
“IMF gold sales will not flow into the physical market. It only transits from one central bank to another, that's all,” said Kwan.
Any sale of IMF gold would also be done in accordance with a European central bank gold accord, which limits total gold sales to 500 tons a year.
“Jewelers have come back to buy, although I think volumes are not great. I think they are waiting for the price to test $920 before buying more,” said a dealer in Singapore.
Gold bars were on par with spot London prices in Singapore, unchanged from last week
“If there's no follow through on the downside for gold, I think it's a good chance for investors and small speculators to buy on margins,” said Kwan of Phillip Futures.
“The upside is still $950. Once it's broken, I can tell you gold could see $1,000,” he said.
“Gold bulls have the solid near-term technical advantage and are looking for more on the upside in the near term,” said Pradeep Unni, an analyst at Vision Commodities in Dubai.
“$950 is more of a psychological resistance, which could be easily taken out in the coming days,” he said.
Platinum retreated as investors booked profit from last week's record high, palladium was below a 6-1/2-year high and silver held near its best level in 27 years.
Spot platinum fell to $2,125/2,132 an ounce from $2,135/2,145 an ounce and was off last week's record high of $2,192 an ounce.
Japanese platinum futures were also off record highs. The most active December contract on the Tokyo Commodity Exchange fell ¥83 yen per gram lower to ¥7,106.
Palladium fell to $513.00/518.00 an ounce from $520/525 an ounce late in New York.
Silver edged down to $18.04/18.09 an ounce from $18.07/18.12 an ounce - not far from a 27-year peak of $18.15 hit on Monday. (Reuters)