Gold May Fall as Investors Seek Cash as Equities Slump on Growth Concerns

Sept. 5 (Bloomberg) -- Gold may fall as some investors sell the metal for cash to cover losses in other markets after global equities slumped on concern that economic growth in the U.S. is slowing and the sovereign-debt crisis in Europe is worsening.

Immediate-delivery gold traded little changed at $1,880.70 at 9:46 a.m. Singapore time after swinging between gains and losses of 0.5 percent. The metal reached a record $1,913.50 on Aug. 23. December-delivery futures rose 0.4 percent to $1,883.90 an ounce, paring a 0.9 percent advance. Bullion priced in euros and sterling jumped to all-time highs.

“Given the economic uncertainties in the world, any drop in gold will be limited as it benefits from the risk aversion trade,” said Li Ning, an analyst China International Futures (Shanghai) Co.

Asian stocks fell, extending a global rout, after a Sept. 3 report showed no jobs were added in the U.S. last month, adding to signs the world’s largest economy is slowing down. The unemployment rate held at 9.1 percent, fueling speculation the Federal Reserve may take additional stimulus measures. U.S. markets are closed today for the Labor Day holiday.

In Europe, Germany Chancellor Angela Merkel’s party suffered an election loss, raising concern that opposition toward bailouts for debt-ridden European nations is mounting. Italian Prime Minister Silvio Berlusconi is facing a general strike tomorrow as he seeks parliamentary backing for a 45.5 billion-euro ($65 billion) austerity plan.

“Gold is very likely to test its record soon, although it may encounter some profit-taking along the way as investors seek cash to cover losses in other markets,” Li said by phone from Shanghai.

Gold ETPs
The amount of gold held by exchange-traded products fell for a third day to 2,142.366 metric tons after reaching a record 2,216.756 tons on Aug. 8, Bloomberg data show. Hedge funds and other money managers trimmed their net-long gold positions by 6 percent to 176,947 contracts in the week to Aug. 30, data from the U.S. Commodity Futures Trading Commission showed.

Still, 20 of 33 traders, investors and analysts surveyed by Bloomberg said bullion will rise this week. Eight predicted a drop and five were neutral.

Cash platinum shed 0.4 percent to $1,875.50 an ounce, dropping below gold on concern a slowdown will trim demand for the metal used mainly in auto catalysts. Spot silver lost 0.3 percent to $43.125 an ounce, while palladium rose 0.3 percent to $777 an ounce.