Thursday, February 4, 2010

Gold Trades Near Three-Month Low After Dollar Extends Rally

Gold traded little changed near a three-month low after plunging the most in 14 months yesterday as the dollar’s rally reduced the appeal of the metal as an alternative investment. Silver traded near a five-month low.

Bullion for immediate delivery rose as much as 0.5 percent earlier after plunging 4.2 percent to a three-month low yesterday. Prices pared gains as the dollar rallied to its highest in more than eight months against the euro amid concern widening deficits will hamper Europe’s economic recovery.

Gold enjoyed a short “pause after yesterday’s sell-off,” said Hiroyuki Kikukawa, general manager of research at Tokyo- based IDO Securities Co. “If you look at the size of yesterday’s price drops in overall commodities and equities, it’s just like one of the big funds being forced to close.”

Gold for immediate delivery fell 22 cents to $1,063.48 an ounce at 10:55 a.m. in Tokyo after touching $1,059.68 yesterday, the lowest level since Nov. 3. Bullion for April delivery, the most widely held contract, gained 0.1 percent to $1,063.80 an ounce on the Comex division of the New York Mercantile Exchange.

The Reuters-Jefferies CRB Index of 19 raw materials fell 2.6 percent to 263.67 yesterday, the biggest drop since Aug. 14. After reaching a 14-month high in January, the commodity gauge ended the month down 6.3 percent, the most since November 2008, on concern that a faltering global recovery will delay increases in consumption.

Unemployment, Deficits

A U.S. Labor Department report yesterday showed first-time claims for unemployment insurance unexpectedly rose to the highest level in seven weeks. Stocks tumbled around the world on concern Greece, Spain and Portugal will have difficulty curbing budget deficits.

The dollar last traded at $1.3681 per euro from $1.3723 in New York yesterday. It earlier reached $1.3669, the strongest level since May 20. Crude oil fell 0.3 percent to $72.95 a barrel after dropping 5 percent yesterday, its biggest decline since July 29.

Silver for immediate delivery gained as much as 0.8 percent to $15.3725 an ounce and last traded at $15.265, down 0.1 percent. The price dropped 6.8 percent yesterday, the biggest decline since December 2008. It touched $15.185 yesterday, the lowest level since Sept. 2.

Palladium dropped 2.9 percent to $397.13 an ounce, the lowest level since Dec. 31. It lost 6.5 percent yesterday, the most since Feb. 23. Spot platinum fell 0.9 percent at $1,493.25 an ounce, after losing 4.4 percent yesterday.

Source: Bloomberg