Gold, crude slide as dollar rebounds
Investors sell commodities to pay for losses elsewhere, but prices expected to recover
London: Gold prices tumbled nearly five per cent to a one-week low below $1,140 (Dh4,187) an ounce yesterday as investors sought safety in dollars and cash.
Other precious metals also slipped. Silver hit a two-week low of $17.66 an ounce, while platinum and palladium touched one-week lows of $1,418.50 and $351 an ounce respectively.
Spot gold briefly hit a low of $1,136.80 a troy ounce, the lowest since November 16 and was bid at $1,153.50 an ounce at 1429 GMT from $1,192.60 on Thursday, when the precious metal hit $1,194.90 — a record high.
"Longer term, gold will come back that much stronger and no doubt will make new highs but for now we come lower," said Simon Weeks, director of precious metals at Bank of Nova Scotia, adding $1,125-1,130 an ounce was a support level.
Gold, a traditional safe haven, has been sold because the higher dollar makes the precious metal more expensive for holders of other currencies.
Selling pressure
Many investors will also be selling gold, up more than 30 per cent this year, to pay for losses elsewhere.
Analysts said expectations of gold purchases by central banks in emerging markets will help buoy prices.
Earlier this week the International Monetary Fund said it had sold 10 tonnes of gold to the Central Bank of Sri Lanka, adding the sale was part of the 403.3 tonnes approved by its executive board in September.
The IMF has already sold 202 tonnes to the Reserve Bank of India and the Bank of Mauritius.
"The central bank story is the one that has driven gold higher not just the dollar story," said Daniel Major, a metals analyst at RBS Global Banking & Markets.
Market reaction
Oil prices sank to six-week lows below $75 a barrel yesterday as investors moved into safer assets.
US crude for January delivery was $74.42 a barrel by 1445 GMT in electronic trading, having shed $4 at one point, more than 5 percent below Wednesday's settlement.
There was no settlement price on Thursday because US markets were closed for Thanksgiving.
London Brent crude fell $1.35 to $75.65.
"Oil reacted in relation to equity markets and a stronger dollar. Some of the exaggeration is coming from lower liquidity on the market because of the holiday," said Harry Tchilinguirian, senior commodity analyst at BNP Paribas.
"In terms of fundamentals, nothing has changed in the market. But the knock-on effect of cross-asset movement has increased since the introduction of quantitative easing."
