Tokyo gold futures dived by their daily price limit to a 10-week low on Monday, pressured by a sell-off in New York, weaker oil prices, negative technical signs and easing tension over Iran's nuclear programme.
The benchmark August 2007 gold contract on the Tokyo Commodity Exchange closed down by its 90-yen limit, or 3.8 percent, at 2,264 yen per gram. The level was the cheapest for TOCOM's benchmark gold since June 30, when prices fell as low as 2,240 yen. It was down 6.8 percent from the one-month high of 2,428 yen set on September 6.
Long liquidation of TOCOM gold accelerated on Monday, as spot gold prices breached key support at $600 an ounce for the first time in more than two months brokers said. Sentiment towards gold soured as falling oil prices and easing tension between Iran and the West weakened gold's appeal as a safe asset and a hedge against inflation.
"The mood is bearish with no positive incentives in sight," a Tokyo broker said. Technically, August gold could fall to 2,079 yen per gram if it breaks near-term support at 2,238 yen, he added. The dollar's strength against the euro also hurt sentiment towards gold, which is seen by investors as a hedge against dollar weakness.
Gold was also hurt by factors such as rumoured central bank selling of gold. Analysts estimate that central banks with an agreement to limit their annual gold sales still have something like 150 tonnes of gold to dispose of before late September.
Spot gold was quoted at $594.70/595.50 an ounce, down from $610.80/611.80 in late New York on Friday. Oil prices slipped below $66 a barrel on Monday, adding to last week's slide on an improved US supply picture and signs of easing tension over Iran's nuclear programme.
Iran's chief nuclear negotiator Ali Larijani offered a two-month suspension of Tehran's nuclear enrichment programme in weekend talks with EU foreign policy chief Javier Solana, an EU diplomat said on Sunday.
The dollar hit a six-week high against the euro on Monday on position unwinding, while the yen edged higher as traders braced for a Group of Seven meeting later this week.
The euro fell to a six-week low of $1.2647 on electronic trading platform EBS before clawing back to $1.2690. On Friday, gold futures in New York plunged 1.2 percent to end at a 10-week low, swamped by a second day of heavy technical and currency-based selling.
Other precious metals futures on TOCOM also tumbled by their daily price limit on Monday, as a bearish mood spilled over from the gold market. TOCOM's benchmark August 2007 platinum contract finished down 100 yen per gram at 4,510, while benchmark August silver settled down 27.0 yen at 441.1 Spot platinum was quoted at $1,210/1,215 an ounce, down from $1,228/1,233 in late New York.
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