Thursday, July 1, 2010

Gold ticks down, but global economic worries support

SINGAPORE: Gold edged down on Thursday, June 1 as investors waited for more clues on the state of the global economy after prices rallied towards a record this week, but falling shares could spur another round of safe haven buying.

The Nikkei dropped more than 2% to a seven-month low on Thursday after US stocks tumbled, as investors dumped riskier assets on the back growing fears of a "double-dip" recession for the global economy.

Spot gold fell US$1.35 to US$1,240 (RM4,030) an ounce by 0503 GMT, having hit a high of US$1,262.45 on Monday ' within sight of a lifetime high above US$1,264 struck last week.

"Gold is increasingly vulnerable to profit taking by investors," said Ong Yi Ling, investment analyst at Phillip Futures.

"On the mid-term to long-term basis, the uptrend for gold is definitely still there. Economic worries will continue to support the gold price, so on the long-term, definitely the uptrend for gold still remains," she said.

Bullion gained than 11% in the second quarter as investors seeking safety from turmoil in the financial markets lifted the metal to its best quarterly performance since the fourth quarter of 2007.

But investors who had bet the price would rally to US$1,250 were closing off their positions to book profits, capping gold on the upside.

US gold futures for August delivery fell US$5.1 an ounce to US$1,240.8.

The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings were unchanged at a record of 1,320.436 tonnes.

Gold shrugged off data that showed China's official purchasing managers' index (PMI) fell to 52.1 in June from 53.9 in May, weaker than the median forecast of 53.1.

"Maybe if you see the numbers are better-than-expected, it can also potentially exert some downward pressure for gold prices because it encourages a bit of risk taking," said Ong at Phillip Futures.

Silver was barely moved, while platinum and palladium dropped because of sagging equities markets.

The euro hit a lifetime low against the Swiss franc on Thursday, as weaker-then-expected Chinese data added to doubts about the strength of the global recovery, while jitters about funding strains in the eurozone lingered.

Crude prices fell for a fourth consecutive day on Thursday to below US$75 on signs that China's economic growth is slowing, while the dollar strengthened as Europe's debt woes kept simmering across financial markets. ' Reuters


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