Gold recovered on Friday after tumbling to its lowest level in two weeks the previous day, while Tokyo futures slipped for the fifth day in a row to a one-month low as investors ditched their holdings. A plunge in US shares has triggered some sell-off in commodities, but the market is not panicking now.
We've seen a similar turbulence in the last several months, so I think the market is getting used to it, said Shoji Sugata, manager at Mitsubishi Corp Futures and Securities.
Funds are shifting out from commodities, including gold, into bonds, after seeing sharp falls in equities, but gold is not likely to tumble from here due to dollar weakness, Sugata said. The physical gold market was muted in Asia, with jewellers and investors waiting for prices to fall further. Arbitrage players were also selling TOCOM contracts and buying spot gold.
Spot gold rose to $664.60/665.10 an ounce from $660.90/661.70 late in New York on Thursday, when it dropped to an intrude low of $660.35 an ounce as a wave of risk aversion swept through financial markets. Most-active June 2008 gold futures on the Tokyo Commodity Exchange tumbled 82 yen per gram or about 3 percent to a trough of 2,564 yen, the lowest level since June 27.
It closed at 2,565 yen, down about 4.8 percent from the 2,693 yen marked on Monday, which matched the high reported on February 27. Albert Cheng, managing director for Far East at the World Gold Council, expects demand in Asia to remain strong in the second quarter of 2007 with consumers steadily buying bullion at between $640 to $680 an ounce.
"I think the driving force is the economy. The economy is doing well," Cheng told Reuters, adding that some investors who have made money in the stock market may also buy gold bars. "Jewellery consumption is very healthy. People feel comfortable with the price range. It's going to be a very good second quarter," he said. This year's first quarter saw an increase in jewellery consumption in Asia's main buyers such as India, China and Indonesia as less volatile prices encouraged buying.
Jewellery consumption in India, the world's largest consumer, rose 47.8 percent to 147 tonnes in the first quarter of 2007, according to WGC. The figures for the second quarter are not available yet.
Traders said the long-term trend for key TOCOM gold could stay strong as long as it can hold above 2,550 yen. Benchmark TOCOM gold fell to a low of 2,556 yen on June 13 and 2,557 yen on June 27.
The most active December contract on the recently launched "mini" gold futures contract fell 82 yen per gram to finish at 2,552 yen. The yen rose to a three-month high of 118.02 yen in trade as a sell-off in credit and stock markets forced investors to cut back on risky carry trades.
The dollar later rebounded, and was trading at around 118.60 yen. TOCOM precious metals fell across the board, although platinum drew some support due to concerns over a labour dispute in South Africa, the world's key producer of the white metal.
South Africa's biggest mining union cancelled wage talks due on Thursday with Anglo Platinum Ltd because the miner was apparently not prepared to substantially change its offer, a union official said. The key TOCOM June platinum contract fell to session low of 4,986 yen, the lowest since July 2, before finishing at 4,999 yen, down 81 yen. Th benchmark TOCOM June silver contract fell by the daily 18-yen limit to close at 492.7 yen per 10 grams, the lowest since June 28.
Platinum rose to $1,320/1,325 an ounce from $1,315/1,319 late in New York. Silver climbed to $12.85/12.90 an ounce from $12.72/12.77 an ounce. Palladium was at $362/367 an ounce versus $364/368 late in New York.
Comments
Comments are closed.