Gold fell more than 1 percent on Monday after ending at its lowest level since June last week but bargain hunters could cushion the fall, while escalating worries about Europe's debt crisis sent bullion priced in euro to a record high.
Fears about a Greek default rose after senior politicians in German Chancellor Angela Merkel's centre-right coalition started talking openly about it following the surprise departure of German's top official at the European Central Bank last week.
Spot gold dropped $29.77 to $1,827.39 an ounce by 0702 GMT, well below a lifetime high of around $1,920 struck last week, with speculators still cashing in on the metal to cover losses in equities.
We still lean negative in our bias and expect a fall toward $1,750 over the next week or so, said Tom Pawlicki, precious metals and energy analyst at MF Global.
A decline may be anything but a straight line fall, as volatility is likely to remain. U.S. gold futures GCcv1 also fell more than 1 percent to a low of around $1,828 an ounce. But gold priced in euro struck a record high at 1,373.92 euros as the single currency fell against the U.S. dollar on Europe's debt crisis -- a factor which had initially lifted cash gold to a record.
Debt-laden Greece will run out of cash next month, the country's deputy finance minister said on Monday, highlighting the country's need to qualify for the next tranche out of its ongoing EU/IMF bailout. Strength in the dollar is weighing on gold. I think perhaps some investors are also concerned about the extreme volatility in gold, said Ong Yi Ling, an analyst at Phillip Futures in
So there is some short-term profit taking before the longer-term uptrend may continue. If gold comes down further to about $1,800 level, I think we could see some buyers coming back to the market.
European and Asian stocks slid on Monday, while the euro dived to a seven-month low against the U.S. dollar as more negative news from Europe hit already shaky sentiment, and markets were also bracing for possible ratings downgrades on France's top banks, as well as Italy's sovereign rating.
The uncertainties about global economic growth have driven gold prices to record highs since July, and are expected to underpin sentiment for the metal until investors are convinced the danger of recession is past. The physical sector saw bargain hunting from jewellers in Indonesia and Thailand, keeping premiums for gold bars steady.
The interest is there. Most jewellers in Indonesia are back to work after the Muslim holiday. The wedding season is coming up in India, so their demand should pick up, said a dealer in Singapore. Buying is expected to pick up in top consumer India, where the wedding season, traditionally the period of greatest bullion demand, gets under way in September.
Gold demand, which dropped in the second quarter of this year, is expected to strengthen by the end of 2011, driven by robust jewellery buying in India and China and recovery in investment demand, senior World Gold Council officials said.
For today, there is little market moving economic data scheduled for release. The focus of financial markets and gold could remain on the euro zone debt crisis, said Ong of Phillip Futures. Later this week, we are seeing quite a bit of economic data: retail sales, industrial output etc. In the energy market, Brent crude oil fell by more than $2 on Monday as investors sold commodities on worries over the European debt crisis and slowing global growth.
Precious metals prices 0702 GMT
Metal Last Change Pct chg YTD pct chg Volume
Spot Gold 1827.39 -29.77 -1.60 28.74
Spot Silver 40.93 -0.39 -0.94 32.63
Spot Platinum 1813.50 -15.20 -0.83 2.60
Spot Palladium 730.00 7.37 +1.02 -8.69
TOCOM Gold 4585.00 -84.00 -1.80 22.96 119691
TOCOM Platinum 4564.00 -84.00 -1.81 -2.81 11227
TOCOM Silver 101.20 -4.20 -3.98 24.94 817
TOCOM Palladium 1836.00 -73.00 -3.82 -12.45 661
COMEX GOLD DEC1 1829.80 -29.70 -1.60 28.73 36210
COMEX SILVER DEC1 41.02 -0.60 -1.45 32.58 4647
TOCOM prices in yen per gram. Spot prices in $ per ounce.
COMEX gold and silver contracts show the most active months
(Editing by Miral Fahmy)