Economy

Gold lower on rates concerns

By Sungwoo Park (China Daily)
Updated: 2011-01-22 10:14

Women in Beijing display bullion designed for the Chinese lunar new year. Gold may rise next week after prices dropped, making the metal more attractive to investors, according to a survey. [Photo / China Daily]

SEOUL - Spot gold headed for a third weekly drop amid speculation China will raise interest rates, curbing demand for commodities, and as exchange-traded product (ETP) holdings fell to the lowest since August.

Bullion for immediate delivery was little changed at $1,347.72 an ounce at 1:41 pm in Seoul on Friday. The price on Thursday tumbled to $1,343.53 an ounce, the lowest level since Nov 19. The February-delivery contract was also little changed at $1,347.60 an ounce in New York.

"Gold continues to be pressured because of concerns about China's tightening," said Hwang Il-doo, a senior trader at Korea Exchange Bank Futures Co in Seoul. "Commodities are all down, and gold can't be free from the pressure." A third weekly fall would be the worst run since July.

Holdings in gold-backed ETPs fell 2.16 tons to 2,065.41 tons on Thursday, the lowest amount since Aug 18, according to data compiled by Bloomberg from 10 providers. They reached a record 2,114.6 tons on Dec 20. Hedge funds last week cut their bullish bets on a gold rally.

China may raise interest rates around the lunar new year if the nation's consumer-price situation remains "not optimistic" in the first quarter, the China Securities Journal said in a front-page editorial on Friday. The week-long break starts on Feb 2.

Gold closed last week at $1,361.72 an ounce after gaining 30 percent in 2010, touching a record $1,431.25 on Dec 7.

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"There's still a possibility that gold may rebound soon if the rate-increase concern is short-lived since rate speculation is not something out of blue," Korea Exchange's Hwang said.

Gold may rise next week after prices dropped, making the metal more attractive to investors, according to a Bloomberg News survey. Five of 11 traders, investors and analysts surveyed by Bloomberg said the metal will climb next week. Four predicted lower prices and two were neutral.

Russia's central bank will raise the share of gold in its reserves from about 8 percent, First Deputy-Chairman of the Central Bank of Russia Alexei Ulyukayev said on Thursday. The bank increased holdings to 25.4 million troy ounces last month, from 25.2 million in November, Bank Rossii said on its website.

Platinum for immediate delivery was little changed at $1,813.40 an ounce. Cash palladium dropped 0.7 percent to $806.25 an ounce.

Bloomberg News