Gold recovers from biggest dip in 5 months after Fed rate rise

LONDON: Gold rose on Friday, recovering from its biggest daily loss in five months as stocks and the dollar retreated, but remained near multi-year lows after the Federal Reservelifted US interest rates for the first time in nearly a decade.

The metal has recovered some lost ground after bottoming out on Thursday at $1,047.25 an ounce, within a few dollars of a near six-year low reached on December 3.

Spot gold was up 0.8 per cent at $1,059.80 an ounce at 1436 GMT, while US gold futures for February delivery were up $9.30 an ounce at $1,058.90.

The rate hike sparked a surge in the dollar and global stocks on Thursday, but led to a 2 per cent slide in gold. Rising rates lift the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

Gold has tumbled 11 per cent this year as investors awaited the rate rise. Now that it is out of the way, attention is turning to other factors.

"Next year the macro picture is looking a little less negative for gold and precious," Mitsubishi analyst Jonathan Butler said. "It's hard to see, without a significant under-performance in the yen and the euro, how the dollar is going to rally very strongly next year."

"The Fed, from its forecasts, is anticipating four rate rises next year. The markets are saying something different - the Fed funds futures currently suggests there'll be just two rises, in June and December."

In other markets, global stocks fell and the dollar slipped 0.2 per cent, taking pressure off gold.

The metal could revisit $1,000 an ounce for the first time in six years if it breaks below its early December low at $1,045 an ounce, according to technical analysts.

"If we can take the low out, which I don't think is unreasonable, $1,033 is the next stop - that's the high from 2008 - and then $1,006, and the $1,000 figure is really the level you should be talking about," Credit Suisse analyst Christopher Hine said.

"It is achievable (by the end of the year)," he said.

Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, fell another 4.5 tonnes on Thursday to 630.17 tonnes, the lowest since September 2008. That brings its monthly outflow to 25 tonnes.

Silver was up 1.5 per cent at $13.90 an ounce, while platinum was up 0.8 per cent at $850.20 an ounce and palladium was down 0.5 per cent at $551.24 an ounce.

Geopolitical tensions boost gold futures to 1-month high

Gold futures jump to 1-month high

Investing.com - Gold prices jumped to a one-month peak on Wednesday, as investors sought refuge after North Korea said it had conducted a successful nuclear test and as tensions between Saudi Arabia and Iran continued to mount.

Gold for February delivery on the Comex division of the New York Mercantile Exchange tacked on $4.30, or 0.4%, to trade at $1,082.70 a troy ounce as of 09:40 GMT, or 4:40AM ET. It earlier rose to $1,085.10, the most since December 7. On Tuesday, gold inched up $3.20, or 0.3%.

Risk sentiment weakened after North Korea confirmed that it had conducted a nuclear test and said that it won't give up nuclear capability unless U.S. abandons its hostile foreign policy towards the country.

Markets were also jittery amid growing tensions between Iran and Saudi Arabia, following the execution of a prominent Saudi Shia cleric.

The yellow metal is up 2% so far this week as market players sought refuge amid instability in the Middle East and fresh concerns over global growth.

Also on the Comex, silver futures for March delivery inched up 0.4 cents, or 0.03%, to trade at $13.97 a troy ounce during European morning hours.

Elsewhere in metals trading, copper prices edged lower on Wednesday, after data showed that activity in China's services sector grew at the slowest pace in 17 months in December, the latest indication that the world's second-largest economy may be losing steam.

The Caixin services purchasing managers' index fell to 50.2 last month from November's reading of 51.2, disappointing expectations for an uptick to 52.3.

The report came after a similar survey earlier in the week showing that Chinese manufacturing activity contracted for the tenth straight month in December, and added to fears over the outlook for the world’s number two economy.

The Asian nation is the world’s largest copper consumer, accounting for nearly 45% of world consumption.

Gold prices up smartly in Asia as Crimea vote supports joining Russia

Gold prices were up smartly in early Asian trade on Monday as an annexation of the Crimean region looked inevitable after a vote on Sunday, prompting President Barack Obama to warn Russia President Vladimir Putin again that the United States and Europe are "prepared to impose additional costs" on Russia for its actions.

The U.S. and Europe have said they would impose economic and diplomatic sanctions on Russia next week, if the vote took place. On Sunday reports said an overwhelming majority supported the referendum to joing Russia and leave the Ukraine with celebrations underway. Official results are due within the day.

On the Comex division of the New York Mercantile Exchange, gold futures for April delivery traded at $1,388.80 a troy ounce, up 0.71%, after settling at $1,379.00 a troy ounce last week.

Comex gold prices ended the week with a gain of 2.95%, or $40.80, amid heightened tensions between Russia and the U.S. over Russia's involvement in Ukraine's political crisis. 

Meanwhile, weaker than expected U.S. consumer confidence data further boosted the appeal of the precious metal.

The University of Michigan consumer sentiment index ticked down to 79.9, from the 81.6 final reading in February. Analysts had expected the index to improve to 82.0.

In the week ahead, investors will be looking ahead to Wednesday’s monetary policy announcement by the Federal Reserve amid speculation the central bank is likely to continue to scale back its stimulus program.

The Fed is also to publish its economic forecasts and Fed Chair Janet Yellen will hold a press conference.

Data from the Commodities Futures Trading Commission released Friday showed that hedge funds and money managers increased their bullish bets in gold futures in the week ending March 11.

Net longs totaled 123,007 contracts, up 3.87% from net longs of 118,241 in the preceding week.

Elsewhere on the Comex, silver for May delivery traded at $21.587 a troy ounce, up 0.81% and copper for May delivery rose 0.29% 2.949 a pound. The industrial metal fell to $2.908 a pound on March 12, the lowest since July 2010.

Fears over problems in China’s financial sector also sapped risk appetite following the country’s first domestic bond default this month.

The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.

Gold / Silver / Copper futures - weekly outlook: October 14 - 18

Investing.com - Gold futures tumbled to a three-month low on Friday, as hopes that U.S. lawmakers would reach a deal on the U.S debt ceiling impasse before the October 17 deadline reduced the safe-haven appeal of the precious metal.  

Some technical selling also contributed to losses after prices fell through key support levels.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery dropped 1.93% on Friday to settle the week at USD1,271.90 a troy ounce. 

Comex gold prices fell to USD1,259.60 a troy ounce earlier in the day, the weakest level since July 10. The December contract settled 0.79% lower at USD1,296.00 a troy ounce on Thursday.

Gold futures were likely to find support at USD1,242.35 a troy ounce, the low from July 10 and resistance at USD1,311.80, the high from October 10.

On the week, the precious metal lost 2.9%, the second consecutive weekly decline.

House Republicans and the Obama administration began a second day of negotiations on Friday on a deal to reopen the government and raise the U.S. debt ceiling for six weeks.

The federal government has been shut down since October 1. Lawmakers must raise the national borrowing limit by October 17 or run the risk of a U.S. sovereign debt default.

Technical selling also pressured gold after it fell through key support levels close to the USD1,280-level, triggering a flurry of automatic sell orders amid bearish chary signals.

An unusually large sell order at the start of the Comex floor trading session sent prices tumbling by USD30 within a minute, fuelling speculation hedge funds and large institutional investors unwound long positions.

Uncertainty surrounding the Federal Reserve's stimulus program was also in focus.

Wednesday’s minutes of the Fed’s September meeting said the decision not to begin tapering stimulus was a "close call," with all but one voting member opting to leave the program unchanged.

Concerns over economic impact of the U.S budget and debt ceiling impasse fuelled expectations that the central bank will further delay plans to start phasing out its USD85 billion a month asset purchase program.

Data released on Friday showed that U.S. consumer sentiment fell to the lowest level in nine months in October, as concerns over the impact of the government shutdown weighed.

The University of Michigan’s consumer sentiment index declined to 75.2 from a final reading of 77.5 in September, and below expectations for a reading of 76.0.

In the week ahead, investors will continue to closely monitor political developments in Washington. Gold traders will also scrutinize speeches from a number of Federal Reserve officials for clues on monetary policy.

Elsewhere on the Comex, silver for December delivery plunged 2.91% on Friday to settle the week at USD21.25 a troy ounce. Silver prices settled 0.02% higher at USD21.89 on Thursday.

On the week, silver future prices declined 2.29%, the fifth consecutive weekly loss.

Meanwhile, copper for December delivery advanced 0.63% on Friday to close the week at USD3.269 a pound. On Thursday, copper futures rose 0.54% to settle at USD3.248 a pound.

Despite gains on Friday, prices of the red metal declined 0.96% on the week, amid concerns a U.S. government shutdown will create a drag on fourth quarter economic growth.

Official data released on Saturday showed that China’s trade surplus narrowed sharply in September as exports declined unexpectedly, fuelling concerns over growth prospects in the world’s second-largest economy. 

China’s trade surplus narrowed to USD15.2 billion last month from a surplus of USD28.6 billion in August, compared to estimates for a surplus of USD27.7 billion.  

Chinese exports fell 0.3% from a year earlier, defying expectations for a 6% increase and following a 7.2% gain in August. 

Market players now looked ahead to a raft of Chinese economic data later in the week, including reports on inflation, gross domestic product, industrial production and retail sales.

The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.

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Gold: A Great Buying Opportunity Approaches

Gold has officially entered a bear market, declining more than 20% from the September 2011 peak of US$1,924/oz. I warned in December last year and in March this year that gold was likely to fall further, even though I was optimistic on the long-term outlook. The reasoning was that gold had gone up every year for 12 straight years, a feat achieved by few assets, and that a sharper correction seemed inevitable at some point. After all, most bull markets have several corrections of +30% and gold had only experienced one steep fall of 29% in 2008. Also, the March-July period is traditionally weakest for gold prices as seasonal demand slows.

Now that gold is falling, what should you do? Well, the technical picture suggests that gold will move to US$1,300-1,400/oz. At these levels, gold would have fallen 27-32% from its peak. Remember that during the 1970s bull market, gold fell 47%, before rising 8x to peak in 1980. So no-one can rule out gold declining a lot more. But there are still good reasons to believe that the gold bull market is far from over. If you think that’s right, accumulating gold below US$1,400/oz makes sense.

But we’re getting ahead of ourselves. Let’s go through Friday’s events and what to expect from here.

What triggered gold’s steep fall on Friday?

Gold was smashed on Friday, down 4.7%. It wasn’t alone as silver finished down 5.3% and other commodities were also sharply lower.

Gold’s fall was largely technical. It breached May 2011 lows of US$1,536/oz. This triggered stop losses. Then the psychological US$1,500/oz was breached and further selling kicked in.

Silver hasn’t yet broken through its key technical support level of US$26/oz. But it should do soon enough.

Beyond technicals, are there other reasons for the sharp fall in gold?

Some have pointed to the European Central bank forcing Cyprus to sell its gold. This is nonsense though given Cyprus’ gold holdings were tiny.

The fact is that gold’s price action has been a concern for the past six months. Despite QE4 and Japan‘s monstrous stimulus package, gold has shown few signs of moving higher. Prior to this, stimulus had always stimulated the gold price too.

So what gives? Well, I think supply and demand for gold may offer a more plausible explanation for the recent price weakness. In 2012, gold demand fell 4%, the first decline since 2009. This was driven by a 12% decline in demand from India, the world’s largest consumer of gold. A rising rupee, making gold more expensive, as well as higher import tariffs, took a toll on Indian demand.

The decrease in gold demand was all the more remarkable given that central bank gold buying reached 48-year highs.

With India imposing higher tariffs on gold this year, there are good reasons to believe that Indian demand will continue to remain soft. Also, retail demand for gold exchange-traded funds has clearly been in sharp decline of late. Lastly, seasonal demand for gold is weakest in the second quarter of the year. It only ramps up in the second half in the lead-up to India’s festival of lights, Diwali.

The decline in gold demand has come while gold supply remains muted. While gold demand is likely to pick up in the second half of the year, supply should stay relatively flat. This is because it takes at least five years to get a gold mine up-and-running, and the 2008 financial crisis delayed a lot of investment into new mines.

Long-term, the supply picture looks poor as gold companies are cutting back investment spend, after it got out of control in the lead-up to 2008. More than a quarter of CEOs at the world’s top 25 gold companies have been replaced over the past 18 months as boards demand better returns on capital.

Therefore, though the near-term outlook is challenging, the picture beyond 2013 appears brighter.

How much further could gold fall?

The truth is that no-one knows. You can monitor supply and demand, the technical and so on, but putting a bottom on the price is impossible.

The 1970s can offer insights, though history never repeats. The gold price from 1974-1976 corrected 47% before it rose 8x to peak at US$887/oz in 1980. Extraordinarily, the price increased 4x in the 13 months before the peak.

All bull markets have sharp corrections. You should expect them and that way there’s not much to panic about when they do happen.

Does gold’s fall signal anything about the broader economic environment?

The different markets are sending mixed signals. Strengthening in bonds and the commodities sell-off would seem to indicate investor caution, or so-called risk off. But stocks are still at or near record highs in most markets, which indicates risk-on.

What’s clear is that economic data have deteriorated of late. In the U.S., poor retail sales numbers were the latest in a line of data which were below expectations. In Asia, export figures from countries dependent on global trade such as South Korea, Taiwan and Singapore have been abysmal.

My take on this is that stocks are the odd man out due to printed money flowing through to them. What I’m seeing is that deflation appears to be defeating central banks’ best efforts to produce inflation to reduce their debt loads. The prices of gold and copper (Dr Copper is used as a sign of economic strength or weakness) indicate that inflation isn’t on the horizon.

Whether these commodity price decline indicate a larger deflationary event is on the way is an open question. Let’s wait and see.

Is the gold bull market over?

Ah, the key question. I think there is a strong likelihood that the bull market isn’t over. History is my guide on this. Commodity bull markets have averaged 18 years over the past century, with 14 years as a minimum. We’re into year 13 of this gold bull market. If the bull market is over, it would be the shortest one in recent history.

More importantly, all bull markets have a so-called parabolic stage, where prices go up in a straight line. You see that in the gold chart of the 1970s. Same for the Nasdaq in the 1990s and so on. We just haven’t seen such a spike in this gold bull market.

Moreover, bull markets require significant public participation. I certainly don’t see the average person in most countries having participated in the gold bull market. It certainly isn’t reflected in the fund allocations of fund managers either. In the U.S. for instance, gold represents less than 1% of institutional fund portfolios.

Finally, history suggests that global currency devaluations favour precious metals. And as mentioned in my newsletter last week, the current expansion of central bank balance sheets is unprecedented.

What about gold stocks, which have been obliterated of late?

Gold stocks are at more than 10-year lows versus the gold price, as measured by the HUI index in the U.S.. They have been significantly underperforming gold for some time.

One key reason is that gold companies have seen mine cost blowouts, investment overspend and silly merger and acquisitions prior to this year. Shareholders did not get the benefits of higher gold prices through better company earnings and dividends.

As mentioned above, the cowboy culture of many gold companies is now changing. Boards are holding managements to account. CEOs are being more disciplined about investment spend, focusing on returns rather than getting bigger just for the sake of it.

In the end, gold stocks are leveraged plays on gold prices. But you need to be able to pick the right companies.

This post was originally published at Asia Confidential:http://asiaconf.com

Gold to be a lousy investment in the next decade

The Indian price of gold has risen six folds in the last decade, fueling a record speculative import spree. Soaring gold imports have hit $42 billion in the first ten months of 2012-13 , pushing the current account deficit to near-disaster levels. The finance minister is wringing his hands in distress, while housewives say that buying gold was the best thing they ever did.

Sorry, but the party is over. The notion that gold is the finest investment, whose value can only go up, is dead wrong. History shows that gold fluctuates crazily, so it can look a fabulous investment for some time and then become a total disaster. There's nothing safe about it.

The Indian price reached a peak of Rs 33,000 per 10gm in late 2011. It has since fallen steadily to just Rs 29,000. Global trends suggest we have entered an era of falling or stagnant gold prices. Housewives and all other buyers beware: gold will probably be a lousy investment in the next decade.

After the US went off the gold standard in 1971, gold shot up from $35/ounce to $835 in 1980. It looked the best investment in sight. But then its price crashed and stayed down till 2001, at around just $250/ounce. Gold investors lost their shirts (and sometimes underpants) for two decades.

However, after 2003 gold zoomed again. It reached a new peak of $1,890 in late 2011. But it has fallen steeply to just $1,501 last Friday. It may bounce back temporarily , but will then fall again.

The fall in price has been less dramatic in India because the rupee has depreciated against the dollar. Even so, gold in rupee terms is down 10% from its peak. Goldman Sachs estimates that the world price will fall sharply to $1,270 by the end of 2014, and other analysts are almost as gloomy.

--> Gold is a safe haven to which people rush in troubled times, so speculators hoped its price would rise in today's troubled conditions. North Korea is threatening nuclear war and Japan seeks to double its money supply. Cyprus has set a dangerous precedent by confiscating uninsured large deposits in its top banks, and this could have prompted a rush into gold. Why, then, has gold fallen instead of rising?

First, fears of a Eurozone breakdown took gold to a peak in 2011, but those fears are mostly gone, so gold is less needed as a safe haven. Second, the US is finally set, after five years, to end its quantitative easing of money supply, reducing the monetary fuel of speculators.

Third, as part of its bail-out package, Cyprus may have to sell its gold reserves to raise 400 million euros. Not only will this glut the market, it stokes fears that similar gold sales may be forced on other troubled Eurozone countries that may also go bust. Troubled Italy has the fourth largest gold holdings in the world of 2,452 tonnes, worth a whopping $95 billion.

Speculators had poured $26 billion into gold-linked securities in 2010 and 2011. But after mid-2012 , when fears of the Eurozone's survival ended, many speculators (including George Soros, the most famous of all) decided that the gold boom was over and got out of the market. Money fled from gold-linked securities. SPDR Gold Shares, the biggest exchange traded fund linked to gold, has seen net redemptions of $7.7 billion in 2013 so far.

Indian speculators and housewives, please read the writing on the wall. The special reasons driving the gold boom of the last decade have gone. It's time to sell gold, not buy.

To discourage gold imports, the finance ministry has increased the import duty on gold. Unfortunately this has raised the domestic price correspondingly, rewarding instead of penalizing speculators. It has also led to increased smuggling.

In decrying and trying to suppress gold imports, the finance ministry has unwittingly given the impression that gold is a great bet. Moreover, government banks today are aggressively pushing sales of gold coins to customers as a must-have investment. They should be obliged to warn customers of the risks too.

The finance minister should warn people, in speech after speech, that gold has already fallen a lot and is likely to fall much further. Every time the gold price falls, he should come out with advertisements saying "I told you so".

Last but not least, he should announce that the import duty on gold will be abolished by the end of the financial year. This will induce people to stop importing now, and wait for next year, by which time speculation may be ebbing anyway. The balance of payments will improve magically.

Why gold and silver are in the dumps

By Nigam Arora

Over the last month, if one could simply watch the news but not know the price of gold and silver, the logical conclusion would have been that this is the glory time for precious metals. After all, from every direction, news was coming that should have driven precious metals higher.

The Bank of Japan got a new chief who started running printing presses faster than Bernanke. Cyprus came close to confiscation of bank deposits, by taxing the deposits. Central banks bought $3 billion worth of gold in the first two months of 2013. North Korea threatened to fire nuclear missiles at U.S. targets.

Based on all of this news, gold should have gone to new highs, but instead gold and silver are in the dumps.

There are outflows from the popular SPDR Gold Trust GLD -3.55%  and iShares Silver Trust SLV -4.33%  . Gold and silver miners have been hard hit. Several components of popular miner ETFs Market Vectors ETF Trust Market Vectors Gold Miners GDX -4.59%   and Market Vectors Junior Gold Miners ETF GDXJ -6.39%   have been hovering near recent lows.

To understand what is happening, take a look at the long-term weekly chart and the medium-term daily chart of GLD.

Click here for the long-term weekly for chart.

Click here for the medium-term daily chart.

The long-term chart shows that about a year after I gave a signal to aggressively buy gold in the $600 range, gold started moving in a smooth channel with a slope of about 45 degrees. Smooth channels with a 45-degree slope are often sustained for a long time. Such was the case with gold.

As the chart shows, in 2011, gold broke out of the smooth channel in a parabolic move that resulted in exhaustion. Such a parabolic breakout from a smooth channel is often a medium-term top, and this was the case with gold. After exhaustion, gold traced a symmetrical triangle, which is shown on the chart. A symmetrical triangle indicates a battle between bulls and bears, with neither side able to prevail. Then came the break on the downside, bears won the battle.

The chart also shows Fibonacci retracement levels. Retracement of 50% to 61.8% also coincides with the target on gold based on the Quantitative Analysis Screen. This is the same target zone that I set when I gave a call to sell gold at $1904 after being a mega bull for a number of years.

Over years at The Arora Report, we have refined algorithms that detect footprints of different types of market participants from trading data across the world. The chart shows the zone where we believe the majority of buying was being done by the momentum crowd. The momo crowd buys gold and silver simply because everyone else in their social circle is buying gold and silver, they think it is going up, and they are scared of monetary policy pursued by the Federal Reserve.

The gold momo crowd keeps up the ruse that they understand inflation and history, but in reality, my experience is that unlike gold bugs, their knowledge is superficial. Further, the momo crowd misunderstood QE3 mortgage-backed security buying as inflationary, when in reality, it was not likely to have any impact on inflation.

The chart also shows the zone where Smart Money has been consistently selling, according to our algorithms.

Now look at the medium-term daily chart on gold. Please pay special attention to the down-sloping trendline. Gold bulls failed to penetrate this line on the upside in a meaningful way in the last six months. Every time gold approached the trendline, the Smart Money was selling to the unsuspecting momo crowd. Recent events caused only a weak bounce that did not even touch the trendline as shown on the chart. The last bounce on news from North Korea and Europe was even weaker. In the meantime, the chart shows that gold made a lower low.

Astute investors know the difference between short-term trades and long-term investments. We had downgraded gold and silver on Feb. 11, just before the recent drop in various timeframes based on our algorithms. These are the same algorithms that called for allocation of 20% of assets to silver for a long-term investment at $17.73, and then called silver to be sold at $45.00 - $50.00. Here are our current ratings on gold and silver.

Negative in the very short-term.

Negative in the short-term.

Negative in the medium-term.

Negative in the long-term.

Positive in the very long-term.

Negative psychology in the gold miners is evident from the fact that Barrick Gold ABX -5.46%   fell 8.36% Wednesday on relatively minor news, compared to the scope of this company, to halt work on the Pascua-Lama mine in Chile. Our favorite silver-miner short at this time is First Majestic Silver AG -5.24%  . We have recently taken profits on short positions in Silver Wheaton SLW -5.17%  and Hecla Mining HL -4.81%  .

Disclosure: Subscribers to the Arora Report are short SLV and silver miner AG.

Gold sinks over $60 to lowest since July 2011 Prices hit by technical selling; silver drops 5.3%

By Myra P. Saefong and Carla Mozee, MarketWatch


SAN FRANCISCO (MarketWatch) — Gold futures sank Friday, poised to settle at their lowest level since July 2011, as recent cuts to price forecasts continued to hurt sentiment, prompting investors to lose confidence in gold as a safe-haven investment.

Gold for June delivery GCM3 -4.28%   extended losses after downbeat U.S. retail-sales data, dropping $67.30, or 4.3%, to $1,497.60 an ounce on the Comex division of the New York Mercantile Exchange, on track for a weekly fall of nearly 5%.

“It’s pure panic bedlam on enormous volume,” said Gene Arensberg, editor of the Got Gold Report.

Based on most-active contracts, prices haven’t settled at a level this low since July of 2011.

Gold also fell along with other commodities as the dollar rose on a weak batch of U.S. data and as the psychological impact of potential selling of the precious metal from Cyprus continued to take a toll.

Gold these days “does not seem to respond adequately to the current financial and geopolitical situation,” said Frederic Panizzutti, senior vice president at MKS Group. “The rumors yesterday about Cyprus possibly selling some gold from its Central Bank reserves had a psychological impact resulting in some selling despite the fact that the amount of gold being mentioned could easily be absorbed by the market.”

Cyprus remained in the headlines Friday amid speculation the government was going to ask for more bailout money, which rattled commodities and underpinned the dollar. The country denied it would seek more help.

But despite the troubles in Cyprus, which are usually supportive for gold as a safe haven, investors have focused on Goldman Sachs’s cut to its gold forecast for 2013 to $1,545 an ounce, down from a prior forecast of $1,610. And minutes of the latest Federal Reserve meeting showed members were at odds about when to stop quantitative easing.

“The speculative funds are near-record short gold futures, so it is easy to understand why Goldman would make such a call, but with the trouble heating up in Europe again, and bonds being bid higher today, the move in gold is somewhat counterintuitive,” said Arensberg.

Overall, gold investors have now created an illusion that the metal is no longer a safe haven and that more declines are in the offing, said Chintan Karnani, an independent bullion analyst based in New Delhi.

More pressure

Also weighing on the dollar-denominated metal Wednesday, the dollar got a bid after poor U.S. economic data. Retail sales dropped by the biggest amount in nine months, falling 0.4% as Americans spent less at gasoline stations and many other stores in March, and exceeding the 0.1% drop that was expected. Oil prices also fell after that data was released.

The dollar index DXY -0.0024%  , which measures the greenback against a basket of six major currencies, rose to 82.267 from 82.153 seen in North American trading late Thursday.

Other data showed producer prices falling sharply in March.

Silver futures down on weak global cues

NEW DELHI:

Silver prices fell by 0.76 per cent to Rs 51,280 per kg in futures trade today as speculators offloaded their positions in tandem with a weak global trend.

At the Multi Commodity Exchange, silver for delivery in May month fell by Rs 394, or 0.76 per cent to Rs 51,280 per kg in business turnover of 18,304 lots.

Similarly, the white metal for delivery in July declined by Rs 397, or 0.75 per cent to Rs 52,285 per kg in 1,256 lots.

Market analysts said speculators offloaded their positions, tracking a weak global trend mainly pulled down silver prices at futures trade.

Meanwhile, silver lost one per cent to 27.37 an ounce in London.

Gold flat as stimulus buying fades, euro zone eyed

 NEW YORK: Gold traded flat on Wednesday, as renewed fears about a worsening euro zone debt crisis along with wider concern about the global economy dampened the metal's allure as a traditional inflation hedge.

Analysts said that some investors could take profits after gold had climbed for four consecutive months prior to October. The failure of recent rallies to break above $1,800 an ounce also triggered technical pressure.

The metal reached an 11-month high on Friday on hopes that the Federal Reserve, European Central Bank and other major central banks would continue pumping money into the global economy to stimulate growth, which has boosted gold's inflation-hedge appeal.

"Additional monetary policy easing in the United States and other countries is no longer fresh news, and so we do not anticipate further significant buying of gold based on monetary policy accommodation alone," said James Steel, HSBC's metal analyst.

Spot gold was down 0.1 percent at $1,762.70 an ounce by 11:10 a.m. EDT (1510 GMT). Bullion was still within reach to a 11-month high of $1,795.69, which marked the loftiest price since November.

US COMEX gold futures for December delivery were 40 cents lower at $1,764.60, with trading volume on track to finish sharply below average, preliminary Reuters data showed.

Silver, however, climbed 0.6 percent to $34.05 an ounce, boosted by better industrial-demand outlook as crude oil and base metals recovered after their recent losses.

Bullion tracked US equities lower, after the International Monetary Fund on Wednesday urged European policymakers to deepen the financial and fiscal ties within the euro area to restore sagging confidence in the global financial system.

Purchases of exchange-traded products (ETPs) reflected investors' positive outlook for bullion in the long term. Bullion backed ETPs rose to a record high on Oct 9.

A Reuters poll of 27 analysts released Wednesday showed they remained bullish on bullion in the long term. Analysts unanimously forecast a record high average price of $1,690.00 an ounce in 2012, up a touch from an estimate of $1,685.00 at the end of the second quarter and $1,765 suggested in January.

Analysts expect the metal to book a thirteenth successive year of gains in 2013, reaching an average price of $1,853.75.

Among platinum group metals that are mostly used as auto catalytic converters, platinum fell on signs that industrial unrest in South Africa, home to the largest platinum reserves, was abating.

Spot platinum was down 0.3 percent on the day at $1,674.75 per ounce, while palladium was down 0.2 percent at $651.47 an ounce.

Palladium also fell after data from China showed a decline in vehicle sales in September versus the year earlier period, the China Association of Automobile Manufacturers (CAAM) said on Wednesday.

Gold extends losses to a third day

SAN FRANCISCO (MarketWatch) — Gold prices traded lower Tuesday as global-growth concerns and nervousness ahead of the corporate-earnings season preoccupied traders, and as the dollar gathered steam.

Gold for December delivery GCZ2 -0.41%  declined $8.10, or 0.5%, to $1,767.50 an ounce on the Comex division of the New York Mercantile Exchange. It earlier traded as low as $1,762 an ounce, and prices had spent most of the session in and out of the red.

Gold was getting mixed messages on Tuesday, said Adam Klopfenstein, a senior marketing strategist with Archer Financial. Some inflationary forces were at play, but amid equity weakness and dollar strength it could not get much traction, he said.

Gold dropped $5.10, or 0.3%, on Monday to settle at $1,775.70 an ounce, after the World Bank downgraded its growth forecast for Chinese growth.

The International Monetary Fund on Tuesday cut its forecast for global growth yet again, to 3.3% this year from a forecast of 3.5% made in July. The bank predicted growth of 3.6% in 2013, from a prediction of 3.9% in July.

The bank also said France, Spain and other euro-zone governments won’t meet fiscal targets agreed upon. IMF: key euro-zone nations to miss deficit targets.

The downgrade and the worries made the dollar the safe-haven of choice, crimping gold and other dollar-denominated commodities.

The ICE dollar index DXY +0.54% , which measures the dollar against a basket of six currencies, rose to 79.981, compared with 79.595 in late North American trading on Monday. See: Dollar rises as IMF sounds warning.

Also on Tuesday, the People’s Bank of China injected a big dose of liquidity to help ease tight money conditions.

That move strengthened hopes for more policy easing from the central bank, providing some underlying support for commodities. See: PBOC’s Zhou pledges flexible, pre-emptive policy

Analysts at Commerzbank said in a research note that markets seem to be recognizing that chances of cheap central bank liquidity will improve if global growth continues to slow. Gold has gained this year largely due to central-bank efforts to keep monetary policy loose.

“The chance of unlimited, cheap central bank liquidity and strong exchange-traded-fund inflows suggest that the price might soon rise towards $1,800,” the analysts wrote. Continuing strikes in the South African gold sector are another supportive factor, they noted.

There are strikes at mines owned by AngloGold Ashanti Ltd. AU +0.07%   ZA:ANG +4.62% , Gold Fields Ltd. ZA:GFI +1.95% , and Harmony Gold Mining Co. ZA:HAR +1.91%   HMY -0.05% . Workers from other sectors have also joined the walkouts in recent days.

While South African gold production has been on the wane, the nation was still the fifth-largest gold producer last year, the Commerzbank analysts said.

“Every ounce which is lost to strikes exacerbates the supply bottlenecks, and since the beginning of September, (exchange-traded funds) have been absorbing virtually half of the global mine production during this period,” they said.

South Africa’s strikes are a strain but one that does not impact gold as much as it impacts platinum, Klopfenstein said.

Platinum, 80% of which is mined in South Africa, remains well supported by strikes that continue to spread, lately to Xstrata PLC’s UK:XTA +0.86%  Eland mine.

January platinum futures PLF3 -0.11%  turned lower, however, off $2.10, or 0.1%, to $1,696.70 an ounce, while palladium for December delivery PAZ2 +0.21%  rose $2.35, or 0.4%, to $659.30 an ounce.

Silver went back to the red, with the December contract SIZ2 -0.05%  down 8 cents, or 0.3%, to $33.93 an ounce.

December copper futures HGZ2 +0.01%  rose less than 1 cent, or 0.1%, to $3.72 a pound

Gold futures swing between gains and losses on USD strength

Gold futures swung between modest gains and losses in rangebound trade during U.S. morning hours on Tuesday, as ongoing concerns over Spain and Greece boosted demand for the U.S. dollar.

Lingering worries over the health of the global economy also weighed on sentiment.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at USD1,775.55 a troy ounce during U.S. morning trade, easing down 0.02%.    

Prices were stuck in a narrow trading range of USD1,771.95 a troy ounce, the daily low and a session high of USD1,781.55 a troy ounce.

Gold prices were likely to find support at USD1,765.75 a troy ounce, the low from October 1 and near-term resistance at USD1,793.85, October 1’s high.

Market sentiment remained under pressure after the International Monetary Fund cut its global growth forecasts and warned of even slower expansion unless officials in the U.S. and Europe address threats to their economies.

The IMF said that the world economy will grow 3.3% this year, the slowest since the 2009 recession, and 3.6% next year, compared with July predictions of 3.5% in 2012 and 3.9% in 2013.

Investors also remained cautious amid uncertainty over how soon Spain may formally request a bailout lingered after euro zone finance ministers said Monday that Madrid did not need external financial aid yet.

Meanwhile, German Chancellor Angel Merkel said earlier that Greece was on a “tough path” following talks with Prime Minister Antonis Samaras in Athens, but one which she believed would pay off.

The talks came amid ongoing uncertainty over whether international creditors will extend loans to Greece, as the country struggles to meet deficit reduction targets.

The risk-off trade environment prompted investors to shun riskier assets, such as stocks and commodities and flock to traditional safe haven assets like the U.S. dollar and Treasuries.

The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.3% to trade at 79.92.

A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.

Elsewhere on the Comex, silver for December delivery was dipped 0.02% to trade at USD34.01 a troy ounce, while copper for December delivery added 0.25% to trade at USD3.728 a pound.

Copper prices found support after the People’s Bank of China injected CNY265 billion into the money market, in a bid to ease tight liquidity conditions.

The move raised optimism for further supportive policy measures out of China, the world’s largest consumer of the industrial metal.

India gold imports to fall 53% in 2012: Bombay Bullion Association

Indian gold imports is set to crash by over 50% in 2012 owing to high prices and increasing taxes imposed by the government, as per the Bombay Bullion Association (BBA). India is the world's biggest gold market and such a big fall in imports could effectively dethrone the country from being the leading gold importer in the world.

In a Reuters Survey, Prithviraj Kothari, President of the BBA estimated that 2012 gold imports could fall down to 450 tonnes, down 53% compared to 969 tonnes imported in 2011. “Last year we had good imports but looking at the pace of the fall so far we are heading for a big fall in 2012"

Meanwhile Q1, 2012 gold imports are seen down 56% at 125 tonnes due to Jeweller's strike and a slow season. "It is March, which is a lean period for jewellery business. Moreover the loss in sales incurred during the 10 days of ongoing strike by jewellers will hit imports. It is likely to be less than 125 tonnes in the January-March period,", The Press Trust of India (PTI) quotes Kothari. Q1, 2011 imports were at 283 tonnes.

The Indian government had raised the import duty on gold while also doubling the customs duty. This was seen as a move to control the influx of huge quantities of gold that has been putting a strain on India's fiscal deficit. Coupled with the current higher prices of gold, many analysts are predicting Indian demand to fall drastically.

And with the crashing Indian demand, China could overtake India to become the biggest gold market in 2012.

High Oil prices strain Gold mining companies, keeps stocks undervalued against Gold

High oil prices are squeezing the profits of oil companies who are already battling the headaches of high labour cost and higher taxes. And with gold prices stabilizing at the same time, some producers may just fell the heat until the yellow metal resumes its bull trend.

The high volatility in oil prices have forced gold companies to hedge their oil needs. Even the world's biggest gold producer- Barrick Gold- had to hedge oil prices considering the uncertainty in the markets. “As the oil spike relates to our cost structure, we've got things under control. But as far as what an oil price rise means to the broader economy, obviously we have some concerns there”, Reuters quotes Barrick CEO Aaron Regent.

Some analysts argue that high oil prices can dent the profits of gold miners even if gold climbs. And as the producer is forced to mine for lower grades, the company yields lower gold for every processed rock with energy costs remaining the same- and this situation of lower yields and higher input cost will inevitably lead to lower profits for the gold mining companies.

The market seems to have picked up on the reasoning as well as gold stocks have constantly underperformed gold prices for most of the gold's bull market- a period when input costs like energy, labour and other prices have been rising as well.

Chart showing performance of Gold (GLD etf) and Gold mining companies (GDX etf)