Gold pulls back from six-month high
LONDON — Gold prices eased on Tuesday, in line with stock markets, oil and the euro, as investors took profits after last week’s six-and-a-half-month high, though expectations that the US Federal Reserve’s latest stimulus measures would spark further price gains limited losses.
Platinum extended Monday’s 2.3% fall on hope that progress in wage talks at Lonmin could end a protracted, violent strike.
A sharp fall in oil prices late on Monday sparked a drop in gold, pulling it further from the peak of $1,777.51 an ounce it hit last week after the Federal Reserve announced a third round of monetary stimulus measures to boost growth.
The US central bank said it would buy $40bn of mortgage-backed debt each month until the US jobs outlook improved substantially, as long as inflation remained contained, in a move known as quantitative easing.
Gold rose 2% on the day of the move, which may benefit gold by maintaining pressure on long-term interest rates, boosting liquidity and fanning inflation fear.
"The policy says that, even if we reach economic sustainability, central banks will keep interest rates low and monetary policy loose," LGT Capital Management analyst Bayram Dincer said.
"The forward-looking guidance of central banks is very favourable for real assets, because in that kind of scenario you have inflation-hedge and diversification benefits provided mainly by gold."
In the short term, however, gold remains under pressure in line with other assets.
Spot gold was down 0.3% at $1,756.09/oz at 10.12am GMT, while US gold futures for December delivery were down $11.60/oz at $1,759.
European shares remained under pressure as investors cashed in gains from the 14-month high they hit after central banks acted to boost the global economy.
The euro also stayed lower, succumbing to profit taking after rallying to four-month highs against the dollar and yen a day earlier, with a renewed rise in peripheral bond yields likely to weigh on sentiment.
Oil steadied near $114 a barrel, meanwhile, steadying after the previous session’s steep slide which traders said did not appear to reflect a fundamentally bearish shift in the outlook.
"Crude oil had a big drop yesterday and this affected the commodity markets in thin conditions," Marex Spectron said in a note. "Overall though, this move is healthy for the market.... I would think that in the absence of any fresh news today, these lower prices will start to look attractive to some."
Silver was down 0.3% at $34.09/oz, having tracked gold to a six-and-a-half-month high at $34.92 last week.
Spot platinum was down 0.6% at $1,651.74/oz, while spot palladium was down 0.5% at $670,20. Platinum posted its biggest one-day drop since early April on Monday, down 2.3%.
Strikers at Lonmin’s Marikana mine in South Africa have cut their basic wage demand to below R11,000 a month to try to end a six-week strike that halted platinum output at the world’s third-largest producer, a negotiator said on Tuesday.
Violent unrest at the mine last month killed 45 people and stopped production, sparking a sharp rally in platinum prices.