24
February
Gold Falls to One-Week Low as Inflation Outlook May Curb Demand
24 February 2010 Business Week
Feb. 24 (Bloomberg) -- Gold declined to the lowest price in more than a week in New York on speculation that a slower economic recovery will curb the metal’s appeal as an inflation hedge and as other commodities dropped.
The U.S. Conference Board’s gauge of consumer sentiment fell to the lowest level in 10 months, a report showed yesterday. Five of the six main industrial metals on the London Metal Exchange and crude oil prices declined today, while other precious metals also fell.
“The market is nervous after the weak U.S. consumer confidence number yesterday,” Jesper Dannesboe, a senior commodity strategist at Societe Generale SA in London, said today by phone. “The main driver for gold is as an inflation hedge. If people are worried about economic growth, then they are less worried about inflation.”
Gold futures for April delivery fell as much as $13, or 1.2 percent, to $1,090.20 an ounce on the New York Mercantile Exchange’s Comex unit, the lowest price since Feb. 12. The metal was at $1,094.90 at 8:21 a.m. local time. Gold for immediate delivery in London was 0.8 percent lower at $1,094.70.
The metal slipped to $1,093 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $1,107 at yesterday’s afternoon fixing. Spot prices are 11 percent below a record $1,226.56 set on Dec. 3.
The U.S. Dollar Index, a six-currency gauge of the greenback’s value, was 0.1 percent lower after climbing 0.4 percent yesterday. Federal Reserve Chairman Ben S. Bernanke may tell Congress in testimony starting today that last week’s increase in the discount rate charged to banks for direct loans isn’t a prelude to higher benchmark borrowing costs.
IMF Sales
Gold is little changed this year. Futures rose 24 percent last year as near-zero U.S. interest rates and government spending weighed on the dollar and countries including India and China boosted gold reserves. The International Monetary Fund sold 212 metric tons to central banks last year in private accords and has 191.3 tons left to offload, which it plans to start selling on the open market.
China may not buy gold from the IMF to avoid causing market volatility, the China Daily reported, citing an unidentified official from the country’s gold association.
It’s not feasible for China to buy the bullion as any purchase would “trigger market speculation and volatility,” the newspaper reported, citing the China Gold Association official. China would shore up its reserves by buying mines overseas, it said. A call to the association wasn’t answered immediately.
