BLBG: Gold Falls as Rally to Record Encourages Some Investors to Sell
By Nicholas Larkin and Glenys Sim
Oct. 15 (Bloomberg) -- Gold declined for a second day in London as the metal’s rally to a record prompted sales by some investors to lock in gains.
Bullion reached an all-time high of $1,070.80 an ounce yesterday as investors sought an alternative to a slumping dollar. The Dollar Index, which tracks the greenback against six currencies, fell for a fourth day today to the lowest level since Aug. 8, 2008. The index has dropped 7.2 percent this year as bullion surged 19 percent.
“Gold appears to be running out of steam,” James Moore, an analyst at TheBullionDesk.com in London, said in a note. “While we wouldn’t rule out fresh highs in the immediate future, the metal would benefit from a consolidation.”
Immediate-delivery bullion lost as much as $11.43, or 1.1 percent, to $1,050.98 an ounce and was at $1,053.72 at 11:05 a.m. local time. December gold futures were 1 percent lower at $1,054.60 an ounce on the New York Mercantile Exchange’s Comex division.
The metal fell to $1,052.50 in the morning “fixing” in London, used by some mining companies to sell production, from $1,059.50 at yesterday’s afternoon fixing. Spot prices are heading for a ninth consecutive annual increase, the best performance since at least 1948.
Chart Signal
Gold’s rally earlier today lifted its 14-day relative strength index, a gauge of whether a commodity is overbought or oversold, to above 70 and it was last at 67.48. A level of 70 or above is viewed by some investors as a signal of an impending retreat.
“The precious metal is overbought, though persistent weakness in the greenback will only push it higher towards $1,100 with speculators driving the market in absence of any real physical interest,” Andrey Kryuchenkov, a VTB Capital analyst in London, said today in a report. “October demand from India, traditionally supported by the Diwali festivities, should remain subdued at these prices.”
The October-December period is the busiest season for jewelry sales in India, spurred by the wedding season and the Diwali holiday.
“As long as the U.S. doesn’t look like it’s going to take any action to raise interest rates, the dollar will continue to fall, and gold will continue to rise,” Ronald Leung, director at Lee Cheong Gold Dealers (Hong Kong) Ltd., said by phone.
Fed’s Target
President Barack Obama has increased U.S. marketable debt to a record as he borrows to reignite growth in the world’s biggest economy. The Federal Reserve’s target rate for overnight bank loans is in a range of zero to 0.25 percent. U.S. policy makers may start raising the fed funds target in the second quarter of 2010, according to analysts’ forecasts compiled by Bloomberg.
“The dollar is for sale unless the Fed is very hawkish,” said Jonathan Gencher, director of foreign-exchange sales at Bank of Montreal in Toronto. “Only when the Fed starts to talk about the removal of stimulus or a rate hike can the dollar get a lasting bid.”
Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, were unchanged for a fifth day at 1,109.31 metric tons yesterday, according to the company’s Web site. Assets in ETF Securities Ltd.’s exchange-traded products added 0.1 percent to a record 8.5 million ounces yesterday, its Web site showed.
Among other precious metals for immediate delivery, silver dropped 1.9 percent to $17.54 an ounce. Platinum fell 1.2 percent to $1,344.85 an ounce, while palladium slid 1.6 percent to $324.50 an ounce.
To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net
