Gold Declines in New York on Stronger Dollar, Chinese Reserves-Shanghai Metals Market

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Gold Declines in New York on Stronger Dollar, Chinese Reserves

Data Analysis 08:56:20AM Mar 10, 2010 Source:SMM

BEIJING, Mar. 10 -- Gold in New York fell to the lowest price in more than a week as the a strengthening dollar reduced demand for the metal as an alternative asset and China said bullion probably won't be the country's main reserve investment.

The dollar rose as much as 0.5 percent against a basket of six major currencies, brining this year's rally to 3.4 percent. Gold is "unlikely" to be China's primary investment to diversify its reserve holdings because of price risks, said Yi Gang, head of the State Administration of Foreign Exchange.

"It's all about the dollar," said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois. "With the dollar continuing to strengthen, gold doesn't have a chance. There isn't enough gold for China to make it its primary reserve. They have to hold dollars."

\Gold futures for April delivery fell $1.70, or 0.2 percent, to close at $1,122.30 an ounce on the Comex in New York, after earlier dropping to $1,108.20, the lowest price since Feb. 26.

"The size of the world's gold market is small," Yi said at a briefing in Beijing today. "China's purchase will push up the prices. That will also hurt Chinese gold consumers."

Private holdings in China are more than 3,000 metric tons, he said.

China increased its reserves of gold by 454 tons to 1,054 tons since 2003 and has the world's fifth-biggest holding by country, the Foreign Exchange Administration said in April last year. The country is the world's largest producer of the precious metal and the second-biggest consumer after India.

Gold Buyers

Some central banks have been increasing their holdings of gold. India, Mauritius and Sri Lanka bought 212 tons last year from the International Monetary Fund.

Gold's losses were limited today as the dollar pared gains and the lowest prices in a week encouraged buying, analysts said. Gold priced in euros reached a record on March 5 as some investors, concerned that some countries will default on debt, purchased the metal as an alternative to holding currency.

"Concern over sovereign debt has been underpinning the market," said Frank McGhee, the head dealer of Integrated Brokerage Services LLC in Chicago. "Gold bounced back, and the shorts just started covering left and right."

Today is the one-year anniversary of a 12-year low for the Standard & Poor's 500 Index. Since then, the benchmark index for U.S. equities soared 68 percent as governments and central banks around the world maintained low interest rates and committed more than $12 trillion to stimulate the economy.

"Given the latest fears in the market are about sovereign debt, it seems as though gold prices could have further to climb," analysts at Scotia Capital said in a report today.

Silver for May delivery in New York rose 6.6 cents, or 0.4 percent, to $17.338 an ounce. Platinum for April delivery fell $3.20, or 0.2 percent, to $1,596.90 an ounce. Palladium for June delivery fell $2.05, or 0.4 percent, $469.30 an ounce.

 

Key Words:  gold  US dollar  US dollar index 

Gold Declines in New York on Stronger Dollar, Chinese Reserves

Data Analysis 08:56:20AM Mar 10, 2010 Source:SMM

BEIJING, Mar. 10 -- Gold in New York fell to the lowest price in more than a week as the a strengthening dollar reduced demand for the metal as an alternative asset and China said bullion probably won't be the country's main reserve investment.

The dollar rose as much as 0.5 percent against a basket of six major currencies, brining this year's rally to 3.4 percent. Gold is "unlikely" to be China's primary investment to diversify its reserve holdings because of price risks, said Yi Gang, head of the State Administration of Foreign Exchange.

"It's all about the dollar," said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois. "With the dollar continuing to strengthen, gold doesn't have a chance. There isn't enough gold for China to make it its primary reserve. They have to hold dollars."

\Gold futures for April delivery fell $1.70, or 0.2 percent, to close at $1,122.30 an ounce on the Comex in New York, after earlier dropping to $1,108.20, the lowest price since Feb. 26.

"The size of the world's gold market is small," Yi said at a briefing in Beijing today. "China's purchase will push up the prices. That will also hurt Chinese gold consumers."

Private holdings in China are more than 3,000 metric tons, he said.

China increased its reserves of gold by 454 tons to 1,054 tons since 2003 and has the world's fifth-biggest holding by country, the Foreign Exchange Administration said in April last year. The country is the world's largest producer of the precious metal and the second-biggest consumer after India.

Gold Buyers

Some central banks have been increasing their holdings of gold. India, Mauritius and Sri Lanka bought 212 tons last year from the International Monetary Fund.

Gold's losses were limited today as the dollar pared gains and the lowest prices in a week encouraged buying, analysts said. Gold priced in euros reached a record on March 5 as some investors, concerned that some countries will default on debt, purchased the metal as an alternative to holding currency.

"Concern over sovereign debt has been underpinning the market," said Frank McGhee, the head dealer of Integrated Brokerage Services LLC in Chicago. "Gold bounced back, and the shorts just started covering left and right."

Today is the one-year anniversary of a 12-year low for the Standard & Poor's 500 Index. Since then, the benchmark index for U.S. equities soared 68 percent as governments and central banks around the world maintained low interest rates and committed more than $12 trillion to stimulate the economy.

"Given the latest fears in the market are about sovereign debt, it seems as though gold prices could have further to climb," analysts at Scotia Capital said in a report today.

Silver for May delivery in New York rose 6.6 cents, or 0.4 percent, to $17.338 an ounce. Platinum for April delivery fell $3.20, or 0.2 percent, to $1,596.90 an ounce. Palladium for June delivery fell $2.05, or 0.4 percent, $469.30 an ounce.

 

Key Words:  gold  US dollar  US dollar index