Sept. 16 (Bloomberg) -- Gold dropped to the lowest in almost three weeks on signs that European banks will have enough cash through year-end, easing concern that the region’s debt crisis will worsen.
The European Central Bank coordinated with international policy makers to lend dollars to banks to help tame the credit crisis. Stocks climbed in the U.S. and Europe as Germany and France gave assurances that Greece will remain part of the European Union, while China indicated it is willing to buy euro- based bonds.
“This is an initial knee-jerk reaction after the ECB’s statement as people are viewing it positive for the European economy,” Frank McGhee, the head dealer at Integrated Brokerage Services in Chicago, said in a telephone interview. “The ECB has managed to find a Band-Aid for now.”
Gold futures for December delivery fell $45.10, or 2.5 percent, to close at $1,781.40 an ounce at 1:56 p.m. on the Comex in New York. Earlier, the price touched $1,775, the lowest since Aug. 26.
The precious metal has climbed 25 percent this year, reaching a record $1,923.70 on Sept. 6.
“Assurance from Germany and France was certainly the main catalyst for today’s fall,” James Cordier, the founder of Optionsellers.com in Tampa, Florida, said in a telephone interview. “China certainly has the checkbook to solve Greece’s problems in the near term.”
Gold prices are in the 11th year of a bull market, the longest winning streak since at least 1920 in London, as investors seek to diversify away from equities and some currencies.
China Bond Buying
China is willing to buy euro bonds “within its capacity,” Zhang Xiaoqiang, the vice chairman of the country’s National Development and Reform Commission, said at the World Economic Forum in Dalian. Zhang reiterated earlier comments at the event by Premier Wen Jiabao, who said developed nations must first “put their own houses in order,” cut deficits and open markets rather than rely on China to bail out the world economy.
Silver futures for December delivery fell $1.032, or 2.5 percent, to settle at $39.501 an ounce on the Comex, sliding for the second straight day.
On the New York Mercantile Exchange, platinum futures for October delivery declined $35.30, or 1.9 percent, to $1,780.60 an ounce, the biggest loss since Aug. 24. Palladium futures for December delivery rose $2.50, or 0.3 percent, to $723.50 an ounce.