BLBG: Gold Falls to 1-Week Low in London on Economic Recovery Concern
By Nicholas Larkin and Glenys Sim
Feb. 24 (Bloomberg) -- Gold declined to the lowest price in more than a week in London on speculation that a slower economic recovery will curb the metal’s appeal as an inflation hedge and as other commodities dropped.
The U.S. Conference Board’s gauge of consumer sentiment fell to the lowest level in 10 months, a report showed yesterday. All six main industrial metals on the London Metal Exchange and crude oil prices declined today, while other precious metals also fell.
“The market is nervous after the weak U.S. consumer confidence number yesterday,” Jesper Dannesboe, a senior commodity strategist at Societe Generale SA in London, said today by phone. “The main driver for gold is as an inflation hedge. If people are worried about economic growth, then they are less worried about inflation.”
Gold for immediate delivery fell $13.09, or 1.2 percent, to $1,090.31 an ounce at 9:43 a.m. local time, the lowest price since Feb. 12. Bullion for April delivery was 1.1 percent lower at $1,091.10 on the New York Mercantile Exchange’s Comex unit.
The U.S. Dollar Index, a six-currency gauge of the greenback’s value, was little changed after climbing 0.4 percent yesterday. Federal Reserve Chairman Ben S. Bernanke may tell Congress in testimony starting today that last week’s increase in the discount rate charged to banks for direct loans isn’t a prelude to higher benchmark borrowing costs.
Gold is little changed this year. Prices climbed 24 percent last year as near-zero U.S. interest rates and government spending weighed on the dollar and countries including India and China boosted gold reserves. The International Monetary Fund sold 212 metric tons to central banks last year in private accords and has 191.3 tons left to offload, which it plans to start selling on the open market.
‘Bearish Tone’
China may not buy gold from the IMF to avoid causing market volatility, the China Daily reported, citing an unidentified official from the country’s gold association.
It’s not feasible for China to buy the bullion as any purchase would “trigger market speculation and volatility,” the newspaper reported, citing the China Gold Association official. China would shore up its reserves by buying mines overseas, it said. A call to the association wasn’t answered immediately.
“Given the failure to conquer technical resistance around $1,125-$1,127 and the IMF’s announcement to begin its on-market sales phase, the metal has taken on a more bearish tone and may need to consolidate further before making a more sustainable push higher,” James Moore, an analyst at TheBullionDesk.com in London, said in a report.
Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, fell 0.91 tons to 1,106.99 tons yesterday, according to figures on the company’s Web site.
Among other precious metals for immediate delivery in London, silver slipped 0.9 percent to $15.6875 an ounce. Platinum fell 0.9 percent to $1,499 an ounce, while palladium slid 1.3 percent to $426.95 an ounce.
