Hang on !!ODJ Asia Precious Metals: Gold Tumbles On Saddam,Recovers Partially
Sydney, Dec 15, 2003 (ODJ via COMTEX) -- (Dow Jones) - Spot gold fell as much as US$7.50 a troy ounce early Monday in Asia, following the weekend capture of former Iraqi dictator Saddam Hussein, but then recovered a portion of its losses as bargain hunters lifted bullion in tandem with the euro.
But with gold at US$405.58/oz at 0735 GMT, the yellow metal still sat US$3.57 below Friday's late New York price of US$409.15.
Traders in the region were quick to blame the sharp morning drop on Saddam's arrest, suggesting that some market players were using the event as an opportunity to book profits. In addition, the U.S. dollar's surge off Friday's new record low against the euro was highlighted.
"The reason that you had a bit of a pullback (in gold) is that there was a bit of euphoria in U.S. dollar assets...a short term euphoric response to Saddam being captured," said Alastair McIntyre, director of precious metals with ScotiaMocatta in Hong Kong.
But through the morning, McIntyre and several others told Dow Jones Newswires that support at US$400 would hold.
The prediction ultimately proved correct as bullion slipped as low as US$401.65/oz at mid-morning, before changing directions and partially recovering.
(Prices in U.S. dollars/troy ounce, except Tocom in yen/gram.)
Monday Change On Friday Monday Leading
0735 GMT New York Late HK Range Tocom
Gold 405.58 dn 3.57 406.63 401.65-408.00 1,402
Silver 5.56 dn 0.05 5.56 5.47-5.58 19.09
Plat. 824.50 up 1.50 810.50 819.00-825.50 2,716
Pall. 207.50 dn 1.00 206.50 205.00-210.50 716 With gold now hovering around US$405/oz, traders and analysts are still confidently pointing to US$400 as a steady support line, and most, if not all, believe the effect of Saddam's demise will be short-lived.
"It is now clear that somebody other than Hussein must have been commanding recent attacks in Iraq and so it is premature to conclude that Iraq, as well as the rest of the world, will now be free of terrorist attacks," said a Tokyo trader cautioning against dumping the yellow metal as a safe-haven asset.
McIntyre similarly defended the notion that gold prices will remain high, albeit with a different line of reasoning. "The fact that Saddam Hussein has been captured does not change any of the macro-economic factors supporting gold," he said, citing the massive U.S. current account and federal budget deficits, along with still-loose U.S. monetary policy.
While he acknowledged that terrorism and geo-political instability were among the factors currently underpinning gold, McIntyre argued that they are very much secondary.
"For the most part, gold is where it's at because of macro-economic factors, not the geo-political situation," he remarked.
Thus, while the weekend's news continues to dominate the headlines around the world, the bullion market's focus has seemingly already shifted beyond Saddam. And despite Monday's pullback, most observers remain neutral to bullish in their near to medium term outlook.
"Once the euphoria of Saddam's capture has worn off, I would expect gold to work higher again but still within the US$400-412 range for now," said TheBullionDesk's James Moore in a note Monday.
For its part, ABN AMRO's precious metals team indicated support at US$399-401/oz, with resistance at US$409-411, and said it remains "bullish for the mid term."
Among the other precious metals, traders said silver essentially continued to track gold tightly, as it has done for several weeks, while platinum and palladium were more or less unchanged from their late New York prices Friday.
Meanwhile, gold futures on the Tokyo Commodity Exchange tracked the spot market's fluctuations for much of the day. At its intraday low, the benchmark October 2004 contract was down Y22 a gram on Friday's close, hitting bottom at Y1,390/gram. The contract then recovered in the afternoon session, and at one stage was down just Y2.
But modest late gains by the yen helped send prices lower yet again, with October 2004 gold finishing the session at Y1,402/gram, a loss of Y10. Total volume across all contracts was above average though not extraordinary, coming in at 87,845 lots.
The longer dated and most actively traded Tocom silver futures all fell, with the benchmark October 2004 contract shedding Y0.09/gram to close at Y19.09. Total volume came to 6,842 lots.
After a slight loss Friday, Tocom platinum resumed its sharp ascent Monday, with the October 2004 contract gaining Y28/gram to set a new life-of- contract high and finish the day at Y2,716/gram. Volume totaled a heavier-than- usual 80,653 lots.
Finally, Tocom palladium futures mostly rose, with the October 2004 contract climbing Y4 to close at Y716 on a total volume of 1,203 lots.
--- Nicholas Sinclair, Dow Jones Newswires, 612-8235-2957 nicholas.sinclair@dowjones.com (Jim Hawe in Tokyo contributed to this report.)
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