Gold falls with wider markets, fiscal cliff caps losses

LONDON Wed Nov 28, 2012 6:38pm IST

A salesgirl shows a gold necklace to customers at a jewellery showroom in Chandigarh November 11, 2012. REUTERS/Ajay Verma

A salesgirl shows a gold necklace to customers at a jewellery showroom in Chandigarh November 11, 2012.

Credit: Reuters/Ajay Verma

Related Topics

LONDON (Reuters) - Gold fell in a third day of losses on Wednesday, with the market for the yellow metal behaving as a risk asset, as shares and other commodities slipped on concerns about Greece's new debt agreement.

Lenders agreed to cut Greece's debt on Tuesday, averting an imminent bankruptcy, but some details of the deal are unclear and analysts worry it did not do enough to ensure the debt is sustainable.

Spot gold eased 0.47 percent to $1,733.55 an ounce by 1232 GMT, while U.S. gold shed 0.49 percent to $1,733.90.

Andrey Kryuchenkov, analyst with VTB Capital, said that gold had become a "risk off" asset as speculators took profits as shares and commodities fell.

At the same time, U.S. Senate Majority Leader Harry Reid expressed disappointment on Tuesday over slow progress in finding a compromise to avoid $600 billion in tax increases and spending cuts due to start in January, a combination known as the fiscal cliff.

"The main underlying factor supporting gold is the fiscal cliff. We're heading into a period of uncertainty over how this matter will be solved, and until it is resolved the fiscal cliff will be supportive," Citi analyst Jon Bergtheil said.

Even as the market was buffeted around by wider forces, investors are still clinging to the metal's appeal as an ultimate refuge from uncertainty.

This was demonstrated by holdings of SPDR Gold Trust GLD, the world's largest gold-backed exchange-traded fund, hitting a record high.

UPPER HAND FOR DOLLAR?

Despite investors confidence showing through in ETF holdings, the threat of the U.S. economy slipping off the fiscal cliff is not an absolute clear certainty for gold prices as strength in the dollar -- a more popular safe haven -- could well put a cap on gains.

The U.S. currency and the yen gained ground against the euro on Wednesday as investors took profit on gains made after euro zone policymakers agreed on a new debt target for Greece.

GRAPHIC-2012 asset returns: link.reuters.com/muc46s

GRAPHIC-2012 commod returns: link.reuters.com/faz36s

GRAPHIC-Gold/USD correlation: r.reuters.com/ryx52s

GRAPHIC-Gold/silver ratio: r.reuters.com/xyx52s

Holdings of SPDR Gold Trust GLD hit a record 1,345.813 tonnes on November 27, while iShares Silver Trust SLV, the world's largest silver ETF, saw its holdings remain near a two-month low of 9,818.07 tonnes.

In contrast to the stagnant holdings in the silver ETF, spot silver rose to $34.26 an ounce on Tuesday, its loftiest level since mid-October, before easing to $33.76.

Silver is notorious for its volatility. The metal burned the fingers of many investors last year during its surge to a historical high and a subsequent tumble that saw prices fall more than a third within 10 trading days.

Spot platinum was down 0.62 percent at $1,598.2 an ounce, while spot palladium was down 1.50 percent at $655.25 an ounce.

(Editing by Veronica Brown and Alison Birrane)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Markets

REUTERS SHOWCASE

Segway in India

Segway in India

Segway’s India business pegs hope on tech-savvy Modi  Full Article 

Power Outage

Power Outage

Mumbai hit by power cuts  Full Article 

Commodities

Commodities

Gold imports, premiums to jump on festive demand - top refiner  Full Article 

Economic Worries

Economic Worries

Pakistan's promises to IMF in doubt as protests sap economy   Full Article 

Islamic Finance

Islamic Finance

Basel III deposit challenge looms over Islamic banks   Full Article 

Antitrust Probes

Antitrust Probes

U.S. business lobby says concerned China antitrust probes unfair.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage