London: Gold dropped below $1,000 an ounce on Monday, its lowest in almost a week, as the dollar rose broadly and investors took a breather ahead of this week’s US Federal Reserve and G20 meeting.
Analysts said selling pressure from the physical market has also weighed on bullion which climbed to $1,023.85 an ounce last week, its highest since March 2008, but failed to match its record high of $1,030.80 an ounce.
Spot gold was at $1,000.15 an ounce by 1125 GMT, versus $1,006.15 an ounce late in New York on Friday. The precious metal has gained as much as 16% this year.
“The tricky thing is the selling interest in the physical market and the stronger dollar this morning,” said analyst Manquoba Madinane at Standard Bank in Johannesburg, and echoed traders who mentioned selling from speculators in Asia, driven by worries over the IMF’s plan to sell gold and a firmer dollar.
The dollar rose broadly on Monday, extending its pullback from a one-year low against the euro. On Friday, the IMF member countries formally endorsed a plan for strictly limited sales of 403.3 tonnes of gold from its stockpile but said sales would be done in a way that did not disrupt gold markets.
“Central banks, including China’s, could acquire the gold at lower prices via the market. However, this is likely to be market-adverse on the whole, even if the sale takes place over several years and in a way that will not disrupt gold markets,” Commerzbank said in a research note.
On Monday, Market News International reported that China is considering buying gold being offered for sale by the International Monetary Fund, citing two unnamed government sources, but the report could not be confirmed and traders said it had little lasting impact on the market.
Momentum favours upside
But the upside momentum was still intact, traders said, as the lure of gold remained undimmed with uncertainties over the sustainability of global economic recovery and long-term inflation fears still haunting the investors.
“People are taking a bit of a breather ahead of the FOMC and G20, that’s all,” said Simon Weeks, director of precious metals sales at Bank of Nova Scotia.
The Federal Open Market Committee is likely to hold rates steady at the meeting, which starts on Tuesday but markets want to know if there are signs that the super-accommodative policy stance will be wound back, given a pick up in economic data.
“The market’s got a bit ahead of itself and over extended on the long side. I think at some point bullion will go above $1,000 an ounce again,” he said.
Data on Friday showed that speculators held a record net long position in US gold futures for the week ended 15 September. US gold futures for December delivery fell $8.20 an ounce at $1,002.1 on the COMEX division of the New York Mercantile Exchange.
The world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, said its holdings stood unchanged at 1,086.479 tonnes on 18 September.
In other metals, silver fell to $16.47 an ounce, its lowest in almost a week, and was last at $16.64 an ounce compared with Friday’s $16.96.
Palladium was at $297 an ounce versus $299.50 an ounce on Friday. It hit $304 an ounce last week, its highest since end-August 2008.
Platinum was at $1,313 an ounce compared with $1,327 an ounce.