Gold fell about 1% on Wednesday, extending the previous day’s 3% decline as firmness in the dollar overshadowed the precious metal’s appeal as an alternative investment.
The euro fell to a two-year low against the dollar on Wednesday as investors bet that interest rates outside the United States will be cut sharply to try to bolster global growth. Fears of a global recession also caused a slump in oil prices and stoked doubts over demand for gold and other precious metals.
Gold has been as vulnerable as oil and industrial metals, which reflect market views on the global economy, Yuki Sonoda, adviser at Daiichi Commodities Co in Tokyo. “Gold is no longer special, and now moves in line with the ups and downs of copper, lead and the stock markets,” he said. “I dare to say ‘Even you, gold?’” he said, adding that there isn’t much chance of gold testing resistance at $900 per ounce in the near future. Spot gold stood at $762.60 an ounce as of 0513 GMT, down 1% from New York’s notional close of $770.10. The current level is down 17% from a peak of $931 hit earlier this month.
Underlining the tone, bullion holdings in the world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust GLD, fell to 755.64 tons, according to fund data as of Oct. 21, down from a record of 770.64 tons on Oct. 13.
Uncertainty in global financial markets despite coordinated interest rate cuts by central banks worldwide to address a credit crunch had spurred demand for bullion as a safe-haven asset. On Wednesday, the euro fell below $1.2900, down 1.4% on the day. (Reuters)