LONDON, Oct 3: Gold prices drifted down in Europe on Monday, tracking movements in major currencies, although the slippage was seen limited because of strong seasonal physical demand in major consuming nations.
Some dealers said gold was expected to consolidate around current prices before testing a higher level because crude oil prices were still high and due to continued concern about world tensions fueled by the Iraq conflict and the Indonesia bombings.
Spot gold was trading at $465.10/465.80 a troy ounce at 1034 GMT on Monday, down from $468.80/469.50 last quoted in New York on Friday when it came to within dollars of the recent near-18-year high of $475.
We saw a bit of profit-taking in gold this morning but I think in the near term, high oil prices and inflationary fears should provide some support for prices above $460, said Yingxi Yu, analyst at Barclays Capital.
She said robust physical demand should also help gold.
Physical buying in India, the world’s largest gold consumer, surges in the festival season that peaks in November. Demand in the Middle East, another big consumer, should also pick up at lower price levels, traders said.
Crude oil prices edged up as hurricane-wrecked refineries stayed shut in the United States and strikes threatened to cut supplies at French plants, leaving consumers fearful of winter fuel shortages.
We believe that gold is set for a correction. This is likely to be helped by a firm US dollar, which is approaching some important technical levels, John Reade, analyst with UBS Investment Bank, said in a daily report.
The dollar rallied to a 16-month high against the yen and a three-month peak versus the euro, boosted by expectations of more US interest rate hikes and a disappointing survey of corporate sentiment in Japan.
Traders were also awaiting Friday’s release of US non-farm payrolls data, which should give a pointer to the health of the US economy after the hurricanes.
Bomb attacks in Indonesia over the weekend could attract some investors towards gold’s allure as a safe-haven asset, traders said.
Three separate bombs tore through restaurants packed with Saturday evening diners in the holiday island of Bali, killing up to 27 people and wounding 125.
The market also took note of announcements by South Africa’s Gold Fields Ltd that its output for the quarter to end-September fell around eight per cent to 993,000 ounces but it said output was on track for a good December quarter.
Gold Fields, the world’s fourth biggest gold producer, said its attributable reserves fell by 14.2 million ounces to 64.8 million ounces during the financial year to June.
Spot silver followed gold and slipped to $7.39/7.42 an ounce from $7.44/7.47 last traded in New York. Traders said a drop to about $7.25 would induce fresh buying.
Platinum traded at $922/925 an ounce, down $929/933, while sister metal palladium at $192/195 versus $194/197. —Reuters
