Business | Markets
Gold and platinum slip on profit-booking
Gold and platinum slipped yesterday as investors took profits ahead of a rate decision by the US Federal Reserve, which may set market direction.
- Reuters
- Published: 01:28 January 31, 2008
London: Gold and platinum slipped yesterday as investors took profits ahead of a rate decision by the US Federal Reserve, which may set market direction.
Spot gold fell to $920.95/$921.65 at 1355 GMT from $928.60/$929.30 an ounce in New York on Tuesday, when it rallied to a record high of $933.10 on expectations of more rate cuts in the US and fears about South African mine output.
The metal extended losses, despite the dollar slipping against the euro after a report showed US growth in the fourth quarter was sharply weaker than expected.
"There has been some talk about restarting gold mines in South Africa, but it's not a huge move [for gold]. I think there has been some profit-taking on long positions," Dan Smith, metals analyst at Standard Chartered Bank, said.
"The Fed meeting is going to be critical. The previous 75 basis point cut gave the impression that the Fed is panicking, which encouraged a lot of interest in gold as a safe-haven. If the Fed is seen overdoing and panicking, then it's likely to push gold up again."
The Federal Reserve is widely expected to follow up last week's emergency 75 basis point rate cut, its biggest in a quarter century, with another cut of 25 or 50 basis points after a two-day meeting ending by 1915 GMT on Wednesday.
A rate cut tends to weaken the dollar as investors look for alternative assets, including gold, for higher returns.
"Today all eyes are on the FOMC meeting and another 50 basis points rate cut is widely expected. Thus, only a surprisingly stronger rate cut might be bullish for gold," said Dresdner Kleinwort, referring to the Federal Open Market Committee.
Keeping an eye
Investors kept a close eye on other markets, with the dollar weakening and oil prices holding near a two-week high.
A weaker dollar makes gold cheaper for holders of other currencies and often lifts bullion demand. The metal is also generally seen as a hedge against oil-led inflation. Platinum drop-ped to $1,682/$1,687 an ounce from $1,705/$1,710 in New York. The metal spiked to an historic high of $1,735 an ounce on Tuesday before profit-taking kicked in.
Dealers said supply concerns persisted even though South African miners planned to resume production yesterday after the state power firm promised to boost to boost supplies this week to mines crippled by outages.
Anglo Platinum, the world's top platinum producer, said it had resumed mining at full capacity based on 80 per cent power supplies to its operations, but was not concentrating, smelting or refining.
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