Gold Poised to Snap Four Weeks of Gains; Mideast Concerns Ease
Gold headed for its first weekly decline in five as some investors bet a rally was exaggerated given the diminishing prospects for an escalation of violence in the Middle East.
“The conflict has been regionally contained,” said Wolfgang Wrzesniok, head of marketing and sales at Heraeus Metallhandels GmbH in Hanau, Germany, a gold trader and refiner. It’s “one of the reasons why gold is losing its gains.”
The precious metal, which is typically a haven investment in times of political tension and quickening inflation, climbed to the highest in almost two months on July 17 as oil prices rose to records amid Israeli attacks on Hezbollah bases in Lebanon. It’s down 5.7 percent since the end of last week, the first weekly decline since the week ended June 16.
Gold for delivery in August fell $2.70, 0.4 percent, to $629.80 an ounce at 8:03 a.m. on the Comex division of the New York Mercantile Exchange. In London, gold for immediate delivery was up $1.03 at $629.18 an ounce at 1:04 p.m. local time, after falling as much as $7.45, or 1.2 percent, to $620.70 an ounce.
“The Middle East violence hasn’t escalated to the rest of the region the way some people thought it might,” said Darren Heathcote, head of trading at Investec Australia, in Sydney. “Some people in long positions are happy to take profit.”
$600 Next Week
Gold rose earlier this month amid rising tension over Iran’s nuclear program, North Korean missile tests, bombings in India and the Middle East conflict. It may test $618 an ounce and might fall below $600 next week, Wrzesniok said.
“Those who had created new positions because of the Middle East crisis are liquidating positions,” said Kishore Narne, head of research at Mumbai-based Anand Rathi Commodities.
Crude oil in New York has fallen 5.6 percent since reaching a record on July 14. Copper has lost about 6 percent the past two days.
“The catalyst for heavy selling came from copper and crude oil prices, both of which were heading lower with a good degree of determination,” said John Reade, an analyst at UBG AG in London.
Gold declined further after Federal Reserve Chairman Ben S. Bernanke on July 19 forecast slower economic growth and an easing of inflation.
U.S. Federal Reserve officials saw “significant uncertainty” in June over future interest-rate decisions and expressed concern about higher inflation while expecting it to decline, according to minutes of a June 28-29 meeting released yesterday.
A U.S. government report this week showed that the consumer price index including food and energy rose for a sixth consecutive month.
“Bernanke’s comments were more dovish than expected and interest rate increases may not continue,” said Wrzesniok.
Gold also dropped amid easing demand from jewelry makers, said Wrzesniok at Heraeus, which operates five precious-metals refineries globally.
“There is not much physical demand from retailers as it is summer holidays,” he said. “Overall, there is an overweight of negative factors.”