Gold undermined by stronger dollar By Carole Vaporean and Amanda Cooper
NEW YORK/LONDON | Mon Jul 12, 2010 4:02pm EDT
NEW YORK/LONDON (Reuters) – Gold eased on Monday, falling for the fourth time in seven sessions, as improved investor confidence boosted the dollar against the euro and diverted investment flows into the precious metals complex.
Spot gold fell to $1,198.45 an ounce by 2:35 a.m. from the previous session’s late quote at $1,211.85 an ounce. U.S. August gold futures dropped $11.10 to close at $1,198.70 an ounce on the COMEX. Gold fell in a light, short-term profit-taking sell off after Friday’s run to the top of its recent trading range that has been forming since the start of July.
Gold prices hit record highs in late June as concern over European sovereign debt levels and instability in the broader financial markets fueled a surge in safe-haven investment.
But as concerns subsided, as has investors’ appetite for gold, at least for now. Lately, prices have remained within a sideways consolidation range and should remain so as long as support and resistance levels remain intact.
“As long as gold stays between support and resistance, in this case the 50-day moving average and the upward trendline, expect the sideways action to continue,” said Adam Sarhan, CEO of New York-based Sarhan Capital LLC. Noting Monday’s high came just short of the 50-day moving average around $1,216 an ounce, Sarhan said that parameter is acting as resistance for now. On the downside, analysts defined support by the 6-week low hit on July 7 at $1,185 an ounce, which also marks a one-year upward trendline.
“If the bulls take out resistance, expect to reach the all-time highs,” said Sarhan. On the other hand, he added, a violation of the support level could lead to declines to a 200-day moving average near $1,134 an ounce.
Gold prices also fell as the euro lost ground against the dollar, pulling back from a two-month high. Investors were betting recent gains went too far, too fast as upcoming results of stress tests on European banks loom. Allaying anxiety over some euro zone sovereign debt Greece said it almost halved its central government budget deficit in the first six months of the year. Drastic spending cuts outweighed weaker than expected tax revenues.
“The sovereign risk situation has eased,” said Peter Fertig, a consultant at Quantitative Commodity Research.
“Indications for bank stress tests are positive, which also indicates fears have been overdone,” he added.
In the meantime the world’s largest bullion exchange-traded fund, New York’s SPDR Gold Trust, reported a 1.5-tonne fall in its holdings on Friday, which reflected reduced appetite for gold. Its total holdings have fallen nearly 6 tonnes so far in July.
Physically backed ETFs found favor with investors in the financial crisis, seen as a safe haven at a time other assets classes were prone to quickly losing value. Inflows especially surged in early 2009 and the second quarter of 2010. Data released by the Commodity Futures Trading Commission also showed non-commercial net long positions in New York gold futures and options fell 41,642 to 231,381 in the week to July 6.
Among other precious metals, spot silver slid to $17.89 an ounce by 2:32 a.m. EDT from $18.06 late in the previous session; platinum was down at $1,510.50 an ounce from $1,529 previously; and palladium gave up ground to $450.38 per ounce, down from $456.50 at the previous finish.
(Additional reporting by Jan Harvey in London;Editing by Sofina Mirza-Reid )