NEW YORK, Feb 15: Gold slumped in a shortened New York session on Friday after chief United Nations arms inspector Hans Blix, in a widely watched speech, undermined some US arguments for going to war to rid Iraq of banned weapons.
At the COMEX division of the New York Mercantile Exchange, gold for April delivery shed more than $5 an ounce after Blix told UN Security Council members that no weapons of mass destruction had yet been found in Iraq, although he cautioned that many were unaccounted for.
That obviously is going to beat up the U.S. case for their war effort, said analyst David Meger at Alaron Trading in Chicago. It takes away the safe-haven buying element to the gold market and rallies the Dow, rallies the dollar.
The benchmark contract closed down $5.50 at $352.20 an ounce, after bottoming at $349, 50 cents above a five-week low set Thursday.
Metals trade wrapped up around midday Friday ahead of a US three-day weekend. Financial markets will be closed on Monday in observance of Presidents Day.
But estimated volume was still a a brisk 63,000 contracts, compared to Thursday’s official 56,582.
The contract was already down about $3 before Blix delivered his report card on Iraqi compliance with UN disarmament resolutions.
Nine days ago, futures hit a 6-1/2-year high at $390.80 an ounce, amid fears of imminent war to rid Iraq of illegal chemical, biological and nuclear weapons. That was up 12 per cent since the start of the year, but by Thursday, fund liquidation had knocked gold back down to $348.50.
Blix also cast doubt on the significance of some intelligence information offered by US Secretary of State Colin Powell two weeks ago on Iraq’s weapons programme.
The door for inspectors to return to Iraq after a four-year absence was opened in November with the passing of Security Council Resolution 1441, which threatened serious consequences if Baghdad did not disclose its weapons.
Gold has been in a bull market since 2002 as financial markets fretted while the United States mobilized a massive military build up in the Middle East for a possible war. It has said it would seek a second UN resolution backing use of force.
New participants have poured out of the woodwork into gold, creating almost unprecedented overbought conditions in New York futures and on Japan’s TOCOM.
As of Tuesday, according to CFTC data released after the close Friday, large COMEX speculators had cut their net long position by 16,705 contract to 50,109 contracts, from 66,814 the week before.
But with small investors net long 44,251 contracts there were still 94,360 contracts (293 tons) of bull positions overhanging the market.
Britain supports US war aims, but France, Germany and Russia are opposed. France, Russia and China have the power to veto any resolution.
The White House, worried Iraq will use such weapons to threaten its neighbors or provide them to terrorists, has said it could lead a coalition of willing nations in a war even without UN authorization.
Spot gold was last at $350.50/1.50, down from Thursday’s New York close at $357.25/358.00 and down from London’s afternoon bullion price fix Friday at $354.25.
The euro just took a hit and were seeing a little selling, said Robert Gottlieb, head of bullion trading at HSBC Bank USA. It’s negative but I don’t think it’s over yet.
In other precious metals, March silver rose 0.2 cent to settle at $4.535 an ounce, trading $4.562 to $4.50. Spot silver closed at $4.52/54 off from $4.53/55 at Thursday’s close. It fixed at $4.53 an ounce.
NYMEX April platinum fell $1.60 to $675.00 an ounce. Spot was last priced at $691.00/696.00.
March palladium slipped $1 to $254.00 an ounce while spot palladium last fetched $249/257 an ounce.—Reuters