Gold in Asia traded near a five-week low as some investors continued to sell the metal to cover losses in equities. Tokyo gold futures dropped the daily limit.
Gold futures in Japan dropped the maximum allowed by the exchange for a second day as Asian stocks dropped for a fourth day. The Nikkei 225 Stock Average had its biggest weekly decline since June last week.
In New York, the metal tumbled 5.9% last week after a sell-off wiped more than $1.5 trillion from the value of global equities. „The market is very nervous,” Jonathan Barratt, managing director of Commodity Broking Services in Sydney, said by phone today. „People who have margin calls continue to sell whatever securities that could bring cash to them.” Gold for immediate delivery fell as much as $2.80, or 0.4%, to $639.65 an ounce. The metal traded at $642.05 at 11:20 a.m. in Singapore. In Japan, gold futures for delivery in February 2008 fell ¥90, the most allowed on the Tokyo Commodity Exchange, to ¥2,432 a gram ($653/€496 an ounce) at the morning session close.
Platinum futures for delivery in February 2008 on the Tokyo Commodity Exchange also fell by the daily limit of ¥100, or 2.2%, to ¥4,432 a gram at the close of morning session. Investors who need cash sold gold because it is very liquid, said James Turk, founder of GoldMoney.com, which had $186 million worth of gold and silver in storage for investors at the end of January. Before last week, gold had climbed for seven weeks in a row, gaining more than $80 from the year’s low of $603 on January 5. Gold has more than doubled in the past five years, outpacing the S&P 500 and the benchmark 10-year US Treasury, which have returned about 25% for investors.
US economic data last week added to gold investors’ concern that growth in the world’s biggest economy is slowing, further reducing gold’s appeal as an investment to hedge against inflation, Barratt said. Some investors buy gold to store wealth when raw materials prices rise. The Commerce Department said gross domestic product last quarter rose at a 2.2% annual rate, compared with a 3.5% rate reported on January 31.
New home sales plunged and a gauge of manufacturing contracted, while orders for durable goods slid the most since October. „People are saying ‘well if there’s no inflation, why should I hold on to my gold?”’ Barratt said. „They ask ‘where is that inflation that we’ve been buying gold on?’ and it hasn’t been seen in all those numbers.”
Gold futures for April delivery fell as much as $2.5, or 0.4%, to $641.60 an ounce on the Comex division of the New York Mercantile Exchange before recovering to $644 at 11:23 a.m. Singapore time. Prices dropped 6.2% last week. „More correction” in bullion prices may come amid economic concerns, Ng Cheng Thye, head of the precious metals market desk at Standard Bank Asia, said by phone from Singapore. „Gold could go down to $625 an ounce” before stabilizing, he said.
The yen climbed to its strongest in almost three months against the US dollar as Asian stocks extended a global slump, prompting investors to unwind riskier investments funded by borrowing in Japan. „As gold prices also declined, the perceived risks associated with yen-funded investment in gold increased, likely compounding the decline in the gold price,” David Moore and Tobin Gorey, commodity strategists at Commonwealth Bank of Australia, wrote in a report dated March 1.
The yen gained to 115.83 against the dollar at 11:25 a.m. in Singapore after reaching 115.46, the strongest since December 8, from 116.81 in New York on March 2. Silver for immediate delivery fell 6 cent, or 0.4%, to $12.83 an ounce at 10:58 a.m. in Singapore, extending a decline of 11.6% last week. Platinum fell $5 to $1,201.50 an ounce while palladium fell $4 to $343 an ounce. A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date. (Bloomberg)