Profit Taking, Poor Jewelry Sales Dent Gold Price but Gold ETF Holdings Hit New Record
Source: Reuters (2/3/09)
"Gold extended losses on Tuesday. . .because of profit taking, but record exchange traded fund holdings still boosted sentiment."
The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said holdings rose 9.78 tonnes to a new record of 853.37 tonnes of gold as of February 2 - an increase of more than 9% in the past month.
Gold was trading at $901.40 an ounce, down $1.75 from New York's notional close on Monday, when it dropped more than 2% in selling also driven by weak demand from the jewelry sector. Gold hit a near four-month high of $930.40 on Friday.
Gold has bounced more than 30% since tumbling to a 13-month low of around $680 in late October, aided by a recovery in oil prices, technical buying and investors looking for a safe place to park their assets away from the volatile equity markets.
But high prices also scared off buyers from the jewelry sector, which accounts for almost 70% of global demand for gold. Gold was about 12% below a lifetime high of $1,030.80 struck last March.
India gold futures could hit new highs this week on expectations of a recovery in crude oil and a weaker rupee, but weak physical off-take in the domestic markets could limit the upside. India is the world's largest consumer.
The volume of gold jewellery sales in Abu Dhabi fell 70% in January due to rising prices. "Basically, there's not much interest from the jewelry sector and there's profit taking as well as light selling in Asia," said a dealer in Hong Kong. "But we can still bargain hunt at lower levels. That's why we also see a rebound, which is driven by bargain hunters," said the dealer, referring to a drop to an intraday low of $895.60 an ounce.