Gold futures fell by more than $30 an ounce Thursday

Gold futures fell by more than $30 an ounce Thursday as investors scrambled for cash, ignoring support from a weaker dollar and a World Gold Council report that showed a climb in demand for the metal in the third quarter.

“Gold isn’t paying attention to fundamentals at this time,” said Darin Newsom, a senior analyst at Telvent DTN. The “market seems driven by bearish technical signals leading to investment liquidation.”

Why is the market trading based off technicals over fundamentals — “it seems traders (not just in gold but other markets as well) have grown numb to the constant back and forth of European problems,” he said.

Gold futures for December deliveryGC1Z -1.95%  dropped $32.40, or 1.8%, to $1,741.90 an ounce on the Comex division of the New York Mercantile Exchange.

Gold prices have been battling with resistance between $1,700 and $1,800 an ounce for some weeks now, after having traded above $1,900 at the peak of its recent rally.

For now, short-term support is at $1,715.50, said Newsom. “Recent action would suggest that the market has priced in a hypothetical worst-case scenario, though what a real such event would mean nobody knows,” said Newsom. “This keeps buyers on the sidelines until the market drops to a more attractive price.”

Chintan Karnani, chief analyst at Insignia Consultants in New Delhi, said technical support for Comex gold is at $1,726 and $1,705. “If stock markets fall further then gold will fall further today, but should rise tomorrow on weekend short covering,” he said.

In recent dealings, the U.S. dollar index, which tracks the performance of the greenback against a basket of other major currencies, traded at 77.971, down from 78.261 late Wednesday.

A weaker dollar usually provides some support for dollar-denominated gold, making the metal cheaper to buy for holders of other currencies.

Stock markets in Europe traded sharply lower, “and gold fell hard as New York dealers picked up early orders,” said Adrian Ash, head of research at BullionVault.com. Gold has “been slipping all week against the dollar, but today’s drop marks only a 1-week low for euro, sterling, Canadian, Swiss and Australian investors.”

Demand still strong

Even so, demand for gold remains strong as investors are nervous about the ongoing debt crises in parts of Europe and amid worries about a possible return of global recession.

On Thursday, the World Gold Council said that gold demand in the third quarter rose 6% from a year ago.

“This equates to $57.7 billion, an all-time high in value terms,” the council’s report said.

“Unsurprisingly, investment demand for gold was a key driver during the third quarter. Increasing levels of inflation, the U.S. credit-rating downgrade, a worsening euro-zone sovereign-debt crisis and the lackluster performance of many assets drove investors to increase holdings in gold in order to protect their wealth,” said Marcus Grubb, the World Gold Council’s managing director of investment.

“Given gold’s proven risk-mitigation properties, it is likely that investors will continue to seek protection from economic uncertainty, which shows no signs of abating,” he concluded.

Other metals were lower on Thursday, with December silver off 97 cents, or 2.9%, to $32.85 an ounce. December copper  declined 5 cents, or 1.5%, to $3.43 a pound.

January platinum  fell $23.20, or 1.4%, to $1,607.90 an ounce. December palladium   lost $24.85, or 3.8%, to $629.60 an ounce. – MarketWatch

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Posted by admin on Nov 17 2011. Filed under Gold price. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry