BLBG: Gold Rebounds From Biggest Drop in Three Weeks on Haven Demand
By Glenys Sim and Nicholas Larkin
Jan. 13 (Bloomberg) -- Gold rebounded in London from its biggest drop in three weeks on demand for a haven from a weaker dollar and lower prices for other commodities.
Bullion slid 2 percent yesterday, the most since Dec. 17, as China acted to cool bank lending, potentially curbing demand for raw materials. The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, declined as much as 0.2 percent today, approaching a one-month low. The dollar and gold typically move inversely.
“We expect the dollar to dominate short-term direction,” James Moore, an analyst at London-based TheBullionDesk.com, said in a report. Gold will “maintain its bull trend over the mid- to longer term as investors continue to diversify away from fiat currencies and offset inflation concerns,” he said.
Gold for immediate delivery rose as much as $6.39, or 0.6 percent, to $1,134.89 an ounce and was at $1,131.70 at 11:19 a.m. local time. Bullion for February delivery added 0.2 percent to $1,131.60 on the New York Mercantile Exchange’s Comex unit.
The metal slid to $1,132.75 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $1,151.25 at yesterday’s afternoon fixing. Spot prices are 7.7 percent below a record $1,226.56 set on Dec. 3.
Corn, Oil Drop
China’s central bank yesterday raised the proportion of deposits that banks must set aside as reserves by 0.5 percentage point as of Jan. 18. All of the six main industrial metals traded on the London Metal Exchange fell today. Corn and soybean prices declined in Chicago after the U.S. government said the country had record harvests of the crops last year. Oil slid.
“Gold may be able to avoid being dragged down by other commodities because of its safe-haven status,” said He Ruiyan, head of research at Xiamen International Trade Futures Co. “We’re seeing some flight to safety after China’s tightening.”
The metal climbed 24 percent in 2009, gaining for a ninth year, as the dollar index declined 4.2 percent. There is “underlying demand for the metal from investors who believe that the dollar is tilted for a further decline,” said Jeon Yeong Min, a trader with Hyundai Futures Co. in Seoul.
Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, declined 3.66 metric tons to 1,115.88 tons yesterday, according to the company’s Web site.
Among other precious metals for immediate delivery in London, silver rose 0.5 percent to $18.34 an ounce. Platinum lost 0.6 percent to $1,561.50 an ounce and palladium fell 1.2 percent to $419 an ounce.
Platinum will average $1,525 an ounce this year, 16 percent above a prior estimate, Morgan Stanley said today in a report. The bank raised its palladium forecast by 44 percent to $372 an ounce and cut its rhodium outlook by 4 percent to $2,235 an ounce.
