Gold battered by stock market worries
Friday March 2, 10:52 am ET
By Daniel Magnowski
LONDON (Reuters) - The global flight from risk knocked precious metals again on Friday, with gold falling below $650 an ounce for the first time in three weeks as shaky global stock markets prompted investors to reduce positions in commodities.
Investors often buy gold as a safe bet when financial markets look unstable, but investors are keen to unload the metal after plunges in global equity markets this week, analysts said.
Many investment funds were seen to have bought commodities, including gold, over the past month with the proceeds from stocks as Wall Street reached record highs last month.
"Gold is not glittering any longer as a safe haven," Dresdner Kleinwort analysts said in a market report.
"Commodities in general are perceived as risky assets...This asset class is just sold to reduce portfolio risk and to take profits in order to compensate losses suffered in other assets like equities," the bank said.
"Thus, as long as unwinding of yen carry trades continues and equity prices head south, gold and silver remain in the wake of bear markets."
As of 1537 GMT spot gold was at $651.50/651.95 per ounce, down sharply from $662.60/663.30 in New York on Thursday. It fell as low as $649.25 on Friday, the lowest since February 8 and down almost 6 percent from the nine-month high touched on Monday.
The pan-European FTSEurofirst 300 index (^FTEU3 - News) was down 0.35 percent by 1536 GMT after losing 5 percent in the past three sessions, while in the United States the Dow Jones industrial average (DJI:^DJI - News) was down 0.22 percent.
A 9 percent fall in the Shanghai stock market (^SSEC - News) on Tuesday triggered a global flight away from stocks into less risky assets.
Technical sentiment in gold deteriorated after the price went below several near- and medium-term moving averages.
Cash gold broke below its seven-day moving average of $674 and its 30-day average around $660.
However, traders said gold might receive support from firm energy prices.
U.S. crude oil futures hit a 2007 high on Thursday on tightening fuel supplies in the United States.
On Friday, U.S. crude traded firmly above $62. It was quoted at $62.15 at 1540 GMT, up 15 cents from Thursday's close. On Thursday it hit $62.40, its highest since December 26.
Gold hit a nine-month high of $689 on Monday as firm crude oil and tensions between Iran and the United States raised the metal's appeal as a haven and a hedge against inflation.
Traders were watching whether gold could hold above $655.40 -- a low reached on February 20.
Silver was quoted at $13.06/13.11 an ounce compared with Thursday's late U.S. level of $13.56/13.61.
Platinum fell to $1,205/1,210 an ounce from $1,236/1,241 in New York.
Palladium was down $3 at 344/347.
(Additional reporting by Chikafumi Hodo in Tokyo)
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