Gold slips 1.5 pct in commodities sell-off

LONDON - Gold slipped 1.5 percent in Europe on Tuesday as commodities sold off across the board, with oil, platinum, base metals and grains posting losses on fears over the bleak economic outlook.

By (Reuters)

Published: Tue 5 Aug 2008, 7:40 PM

Last updated: Sun 5 Apr 2015, 11:49 AM

The precious metal's main external drivers also dampened sentiment, with the dollar rising to a seven-week high against a basket of currencies, and oil slipping more than $2 a barrel to a three-month low.

"Commodities generally are being sold off," said Simon Weeks. "People are liquidating positions, and gold has been caught up in that."

If the precious metal fails to hold the $880 an level, it is likely to fall to $855, and maybe to $845, he said.

Gold fell as low as $881.80 an ounce, its weakest level in nearly six weeks. At 0947 GMT it was at $884.00/885.00, down from $895.55/896.95 late in New York on Monday.

Physical buying is rebounding as prices ease, helping limit some losses.

But the dollar rose to a seven-week high against a basket of currencies on Monday, encouraged by a fall in oil prices, and ahead of an interest rate decision from the U.S. Federal Reserve later in the session.

A firm dollar typically pressures gold, as it dents the precious metal's appeal as an alternative investment, as well as making it more expensive for holders of other currencies.

Falling oil prices are also weighing on gold. U.S. crude futures slipped to a three month low of around $118 a barrel as traders focused on rising OPEC supply and easing demand in the United States and Europe.

Gold prices tend to track movements in the crude market, as it is often bought as a hedge against oil-led inflation. Weaker oil prices also undermine sentiment towards commodities as an asset class.

Fed watched

Traders are now looking ahead to the Fed's rate-setting meeting, a statement from which is due at 1815 GMT. While rates are expected to stay at 2 percent, analysts say the bank's accompanying statement will be closely watched.

"The market consensus is expecting the Fed to keep rates on hold, but the accompanying statement might move markets," said Dresdner Kleinwort consultant Peter Fertig.

Among other precious metals, platinum and palladium extended their losses of the last two sessions, with platinum hitting a fresh six-month low of $1,529 an ounce.

The white metal, chiefly used in the manufacture of autocatalysts, has now shed around 13 percent in the last week, while palladium has dipped nearly 10 percent.

Metals have been hit hard by the worsening outlook for the automotive sector.

A spate of bearish news on Friday, when General Motors, Nissan and BMW all released disappointing statements and U.S. car sales slipped to a 16-year low, precipitated a $100 an ounce slide in platinum prices in that session.

A return of platinum prices to above $2,000 an ounce is looking "more and more unlikely", said precious metals trading house Heraeus.

Spot platinum was at $1,532.50/1,552.50 an ounce against $1,551.00/1,571.00. Spot palladium sank to $345.00/349.00 an ounce from $349.50/357.50 late in New York.

Silver slid to $16.68/16.73 an ounce from $17.00/17.05.

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