Jittery Markets Support Gold; Other Metals Face Heavy Losses
Source: Reuters, Frank Tang and Maytaal Angel (5/18/10)
"We're seeing other markets suffering heavy losses and that could cap gold in the short term. . ."
Platinum and palladium tumbled on the back of industrial metals' broad decline, led by copper's 6% slide. A closely watched industry report, however, said rising investment could take platinum to $2,000/oz. in the next six months.
"We're seeing other markets suffering heavy losses and that could cap gold in the short term because there is a tendency to release profitable positions to pay for nonprofitable ones," said Saxo Bank's Ole Hanson.
Safe-haven play due to economic uncertainties should keep the yellow metal firm, analysts said.
"The momentum is with gold at the moment and, unless the market takes a different view of the euro zone debt crisis, we'll remain supported," Hanson said.
Spot gold was at $1,227.85 at 2:36 p.m. EDT versus $1,230.05 late in New York on Friday, having earlier hit a day high of $1,242.10, just shy of Friday's all-time high of $1,248.95.
U.S. June gold futures settled up 30 cents at $1,228.10/oz.
Volatility in the currency markets also boosted gold. Gold priced in euros and sterling struck a record high overnight as did gold futures in Shanghai.
The euro fell against the dollar on Monday, at one point slipping to a four-year low, on persistent fears euro zone austerity measures will cause a downturn in the region and stifle global growth.
Gold usually trades in step with the euro and counter to the dollar as it is seen as an alternative asset to the U.S. currency. However, the metal has recently been bought as a safe haven asset and hedge against currency volatility.