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  • Gold (US$/t oz.)
  • August 21,06:00
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Gold May Extend Rout on Strengthening Dollar


Gold may extend a rout into a fourth day as concern that Europe’s debt crisis is escalating boosts the dollar, raising the prospect that the precious metal may enter a bear market. Platinum dropped to a two-year low.

Spot gold traded little changed at $1,576.35 an ounce at 9:35 a.m. in Singapore after swinging between gains and losses. Immediate-delivery metal lost 8 percent in the preceding three days, and is set for a second weekly loss. The February-delivery contract slumped as much as 1 percent to $1,571.50 on the Comex.

The dollar rose to an 11-month high against the euro yesterday on signs of increased funding stress as Europe battles its debt crisis, driving spot gold to $1,563.38, the lowest level since Sept. 26. Gold dropped below its 200-day moving average yesterday for the first time in almost three years, indicating to some analysts that more declines may be in store.

“As the U.S. dollar picked up strength, everyone just ran from the market,” said Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney. “Technically we’re looking weak.”

This week’s declines have come even as holdings in bullion- backed exchange-traded funds rose to an all-time high, gaining 0.1 percent to 2,360.810 metric tons yesterday, according to data tracked by Bloomberg.

Spot gold reached a record $1,921.15 in September, and a 20 percent decline from that peak -- regarded by some investors as signaling a bear market -- would be a price of $1,536.92. Gold has dropped 18 percent from the all-time high.

Newcrest Mining Ltd. (NCM), Australia’s biggest gold producer, fell for fifth day, losing as much as 3.7 percent to A$30.64. Barrick Gold Corp., the world’s gold producer, lost 3.8 percent in Toronto yesterday, the most in a month.

Bailout Fund

German Chancellor Angela Merkel said that there is no easy solution to the European sovereign-debt crisis after rejecting an increase in the upper limit of funding for the region’s permanent bailout mechanism. The euro fell below $1.30 for the first time since January, and traded at $1.2988 today.

“The kind of waterfall decline we have seen in gold indicates a significant degree of forced selling emanating from the hedge-fund world,” James Dailey, who manages $215 million at TEAM Financial Management LLC in Harrisburg, Pennsylvania, said in a telephone interview yesterday.

Cash platinum fell for a fourth day, losing as much 1.1 percent to $1,406 an ounce, the lowest level since Dec. 23, 2009. Palladium declined 0.4 percent, also dropping for a fourth day, to $615.75 an ounce.

Spot silver gained as much as 1.1 percent to $29.22 an ounce, after dropping as much as 7.3 percent to $28.54 yesterday, the lowest level since Oct. 5.(Courtesy Bloomberg)

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