World Business

Gold snaps three-day drop as haven allure strengthens on Europe

(Agencies)
Updated: 2010-05-24 14:38
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Gold climbed, snapping a three-day retreat, as renewed weakness in the euro revived demand for a haven and last week's decline to the lowest level in more than two weeks boosted the metal's allure.

Gold for immediate delivery, which slid to a two-week low of $1,166.30 an ounce on May 21, climbed 0.9 percent to $1,187.40 at 1:11 pm in Singapore. The June-delivery contract in New York jumped 1 percent to $1,187.40.

After the "selloff there's some revived appetite for precious metals, including gold, as a decline in the euro reminds the market of risks linked to the region," said Hwang Il Doo, a Seoul-based trader with KEB Futures Co. "The price declines are no more than a mere correction."

Gold slid 4.6 percent last week, the most since February 2009, as some investors reduced their positions as the euro advanced. The metal has strengthened 8 percent this year and is heading for a 10th annual gain.

The euro weakened against the dollar, ending a three-day gain, after European Union finance ministers pledged to stiffen sanctions imposed on high-deficit countries and ruled out setting up a mechanism to manage state defaults. The region's debt crisis helped drive gold to a record $1,249.40 on May 14.

The Dollar Index strengthened as much as 0.6 percent today.

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Hedge-fund managers and other large speculators cut their net-long positions in New York gold futures in the week to May 18, according to US Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 231,670 contracts on the Comex division of the New York Mercantile Exchange, the commission said in its Commitments of Traders report. Net-long positions fell by 4,155 contracts, or 2 percent, from a week earlier.

Platinum, palladium and silver recovered from last week's tumble. Palladium slumped 17 percent last week, platinum 12 percent and silver fell 8.7 percent on concern that Europe's debt crisis and slowing growth in China may erode consumption.

The declines in platinum and palladium "are overdone," Allidina Hussein, head of commodity research at Morgan Stanley & Co, wrote in a report yesterday. "Current levels seem an attractive entry point into what we consider a fundamentally supported market outlook."

Silver for immediate delivery jumped 1.6 percent to $17.9425 an ounce, while platinum gained 0.5 percent to $1,514.75 an ounce and palladium gained 1.1 percent to $441.75 an ounce.