Wednesday, October 5, 2011

Spot Gold Falls Again


LONDON—Spot gold headed lower in choppy European trade as an air of hesitance hung over the market following the previous session's heavy slide.

Wednesday morning, spot gold was at $1,603.20 a troy ounce, down from $1,624.70 late in New York on Tuesday. The metal fell in the previous session after U.S. Federal Reserve Chairman Ben Bernanke presented a downbeat assessment of the U.S. economy, yet indicated the Fed doesn't have any immediate plans to launch a third round of quantitative easing.

"After fooling us and a lot of the market that it was divorcing itself from weaker equities and a stronger dollar, gold displayed its nastier side yesterday," said UBS analyst Edel Tully. "This week holds a lot of headline risk as economic data is due on both sides of the Atlantic, along with speeches from policy makers."

Of particular interest this week will be Friday's employment figures--considered a proxy for the health of the U.S. economy--and a speech Thursday by European Central Bank President Jean-Claude Trichet, in which news of an interest-rate cut could be on the cards, said Ms. Tully.

Any fresh economic developments in the euro zone will also be closely eyed, she added.

Lower prices could stimulate renewed buying interest in precious metals, said analysts.

In the case of platinum and palladium, falling metal values could make it uneconomical to operate more expensive mines, having the effect of tightening the market and supporting prices, said James Steel of HSBC.

Lower gold prices, as well as stimulating interest from buyers in emerging markets, could also encourage interest from the official sector, he added.

"This leads us to look for prices of gold and the other precious metals to bottom out in the near-term," said Mr. Steel.

August saw fresh gold purchases by central banks in emerging markets. Russia increased its gold reserves by 118,000 troy ounces to 27.161 million ounces in August, and Thailand lifted its reserves by 300,000 ounces to 4.4 million ounces, according to the International Monetary Fund.

Spot silver was at $28.679 per ounce, down from $30.28 late in New York, while spot platinum was at $1,440 per ounce, compared with $1,483.50, and spot palladium was at $553.78 per ounce, down from $567.50.

—Rhiannon Hoyle contributed to this article.
Write to Francesca Freeman at

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