Westkam Gold Corp (WKGFF)

[the cork]

Gold slides as China move boosts dollar
Jan Harvey
LONDON
Fri Feb 12, 2010 8:54am EST


LONDON (Reuters) - Gold was down 1 percent in Europe on Friday as the dollar hit a seven-month high versus a basket of currencies after China unveiled a surprise hike in commercial banks' reserve requirements.

China

The euro slipped to a nine-month low against the dollar after a European Union summit the previous day failed to quell investors' concerns on Greece, and as China's surprise monetary tightening hit assets seen as higher risk.

Spot gold was bid at $1,084.30 an ounce at 1317 GMT (8:17 a.m. EST) versus $1,095.85 late in New York on Thursday. In that session it hit a one-week high of $1,097.75 an ounce as investors bought the metal amid fears over the stability of paper currencies.

Michael Widmer, an analyst at Bank of America-Merrill Lynch, said gold was coming under pressure as the dollar appreciated broadly on the back of the China news.

"We always see that when the markets sell off on the back of a macro event, gold sells off along with those," he added. "Metals are lower, equities are lower as well and gold is falling along with those."

U.S. gold futures for April delivery on the COMEX division of the New York Mercantile Exchange fell $13.20 to $1,081.00 an ounce.

The dollar hit its highest since late July against a basket of currencies on Friday after China surprised markets by raising commercial banks' reserve requirements.

Strength in the U.S. unit curbs gold's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.

Other commodities also declined, with oil tumbling 2 percent to below $74 a barrel and base metals copper and zinc sliding nearly 3 percent at their lows.

European shares turned negative and U.S. stock futures pointed lower after China's central bank raised reserve requirements.

EURO-PRICED GOLD

Gold priced in euros performed particularly well on Thursday, rising 2.8 percent to a peak of 802.73 euros an ounce, within 10 euros of the record high it hit in December.

The metal steadied on Friday to 798.85 euros an ounce from 799.49 late in the last session, but from a technical viewpoint it is well positioned to make fresh gains, analysts said.

"Since early December, gold denominated in euros has been locked in a well-defined contracting range," said technical analysts at Barclays Capital. "Now that range is on the verge of giving way for a resumption of the larger bull trend.

"A break of 802 would confirm (this), pointing to a re-test of the 813 December high. However, this should prove to be only a temporary stopping point as the measured move... targets the 856 area before greater signs of topping emerge."

Elsewhere demand for gold-backed exchange-traded funds remained lackluster, with holdings of the world's largest gold ETF, New York's SPDR Gold Trust, steady on Thursday, the trust said on its website.

Among other precious metals, silver was at $15.34 an ounce against $15.64. Platinum was at $1,496 an ounce against $1,528 and palladium at $412.50 against $419.50.

Toyota Motor Corp's (7203.T) safety recalls will hurt U.S. dealer sales in the first quarter, two major U.S. auto dealership groups said on Thursday.

Platinum and palladium are heavily exposed to the automotive market, as they are primarily consumed by carmakers for use in catalytic converters.

http://www.reuters.com/article/ousivMolt/idUSTRE5B10OV20100212