Gold steadies above 2-week low; defensive

LONDON - Gold steadied on Monday above a two-week low, but investors were nervous about taking new positions following recent losses in bullion and global equities markets.

By (Reuters)

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Published: Mon 30 Jul 2007, 6:40 PM

Last updated: Sat 4 Apr 2015, 10:23 PM

Traders said weaker share prices had forced investors to lighten positions in risky assets, including commodities, until the situation in stock markets stabilised.

“The weakness in global stock markets on concerns of a credit crunch continues and this is probably a negative factor for gold,” Dresdner Kleinwort said in a research note.

“Rising crude oil prices failed to provide support for gold last Friday, and might again be overruled by investors shunning risky assets and flying to the safe havens of government bonds.”

Spot gold was quoted at $662.00/662.00 an ounce by 0949 GMT, against $661.40/662.20 in New York on Friday, after it fell as far as $656.90 -- the lowest since July 9.

Traditionally gold is seen as protection against economic and political uncertainty, but in recent months stock market losses have triggered a sell-off in precious metals.

“There are two types of investors in the gold market: there are investors who buy gold as a safe-haven asset and stick with it for years, and there are the second type of investors who react on news flows and macro-economic data,” said Michael Widmer, analyst at Calyon Corporate and Investment Bank.

“I don’t think they buy gold as a safe-haven asset. They move in and out of the gold market as their view on the fundamentals drivers changes,” Widmer said, adding he was still not bullish on gold and any substantial price rise might not come through until the fourth quarter.

Dealers kept an eye on the dollar, which slipped modestly against a basket of major currencies, giving back some of last week’s gains as investors geared up for a barrage of economic data and potentially more credit-driven market volatility.

No major economic data releases were due on Monday, leaving investors to focus on data later in the week, including U.S. non-farm payrolls, and on how credit market gyrations affect stocks, bonds and currencies.

Gold often moves in the opposite direction of the dollar.

In the physical market, Saudi Arabia’s gold sales rose almost 17 percent in volume and 25 percent in value in the second quarter of 2007, a World Gold Council official has said.

Four of the seven Gulf Arab stock benchmarks dropped more than 35 percent in 2006, resulting in a capitalisation loss of about $500 billion since February, and analysts say much capital has left the bourses for other asset classes.

Platinum hit a one-month low of $1,264 an ounce on profit-taking after Nissan Motor Co. said it developed a catalyst for gasoline cars that halves the use of precious metal components.

Spot platinum was last quoted at $1,272/1,277 per ounce, up $1 from New York, while palladium was flat at $360/364. Silver edged up to $12.72/12.76 an ounce from $12.68/12.73 in the U.S. market.

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