Gold drops most in two months as SEC sues Goldman, dollar gains
Monday, 19 April 2010
LONDON, Apr 18 (Bloomberg): Gold fell the most in two months after regulators accused Goldman Sachs Group Inc. of fraud, spurring investors to seek a haven in the dollar and eroding the precious metal's appeal as an alternative asset.
The dollar rose as much as 0.5 per cent against a basket of six major currencies, including the euro. The Securities and Exchange Commission accused New York-based Goldman Sachs, the largest US commodity broker, of defrauding investors with a financial product tied to subprime mortgages. Gold rose 24 per cent last year as the dollar fell 4.2 per cent.
"Goldman is a major player in gold, silver, all commodities," said Frank McGhee, the head dealer at Integrated Brokerage Services Inc. in Chicago. "They have massive positions. This puts a big question mark on all commodity activity."
Gold futures for June delivery fell $23.40, or 2 per cent, to $1,136.90 an ounce on the Comex in New York. It was the biggest drop since Feb. 4. The metal lost 2.2 per cent this week.
Goldman Sachs and Fabrice Tourre, a vice president, misled investors by misstating and omitting facts about the method of selection and the quality of mortgage securities that were tied to a collateralized-debt obligation called ABACUS 2007-AC1, the SEC said today in a statement. The government's civil suit claims investors in the CDO lost more than $1 billion.
Goldman Sachs holds the 11th largest stake in the SPDR Gold Trust, Bloomberg data indicate. SPDR is the biggest exchange- traded fund backed by bullion. Paulson & Co., the hedge fund mentioned by the SEC in connection with the Goldman Sachs matter, is the largest owner, the data show. Paulson wasn't accused of wrongdoing by the agency.
"It's just a bloodbath," said Matt Zeman, a metals strategist at LaSalle Futures Group in Chicago. "Gold was hanging tough until the Goldman news. You've got sell stops being triggered and that's why you have this landslide selling."
Gold, which rallied to a four-month high of $1,170.70 on April 12, was poised for a correction, said Michael Guido, the director of hedge-fund sales at Macquarie Bank Ltd. in New York.
"I don't think you're getting people who are looking at the Goldman news and saying, 'Let's get out of gold,'" Guido said. "The market's been in a technical slump, it's fighting against a stronger dollar and the GLD ETF has hit a record. Everybody was in on the same side."
Holdings in the SPDR ETF have been unchanged at a record 1,141.04 metric tons since April 12.
Also in New York, silver futures for May delivery fell 75.8 cents, or 4.1 per cent, to $17.675 an ounce on the Comex, also the biggest decline since Feb. 4. The metal fell 3.7 per cent for the week.
Platinum futures for July delivery declined $31, or 1.8 per cent, to $1,695.30 an ounce on the New York Mercantile Exchange, capping a 1.9 per cent loss for the week. June palladium futures fell $14.05, or 2.6 per cent, to $531.85 an ounce, narrowing the week's gain to 3.6 per cent.
The dollar rose as much as 0.5 per cent against a basket of six major currencies, including the euro. The Securities and Exchange Commission accused New York-based Goldman Sachs, the largest US commodity broker, of defrauding investors with a financial product tied to subprime mortgages. Gold rose 24 per cent last year as the dollar fell 4.2 per cent.
"Goldman is a major player in gold, silver, all commodities," said Frank McGhee, the head dealer at Integrated Brokerage Services Inc. in Chicago. "They have massive positions. This puts a big question mark on all commodity activity."
Gold futures for June delivery fell $23.40, or 2 per cent, to $1,136.90 an ounce on the Comex in New York. It was the biggest drop since Feb. 4. The metal lost 2.2 per cent this week.
Goldman Sachs and Fabrice Tourre, a vice president, misled investors by misstating and omitting facts about the method of selection and the quality of mortgage securities that were tied to a collateralized-debt obligation called ABACUS 2007-AC1, the SEC said today in a statement. The government's civil suit claims investors in the CDO lost more than $1 billion.
Goldman Sachs holds the 11th largest stake in the SPDR Gold Trust, Bloomberg data indicate. SPDR is the biggest exchange- traded fund backed by bullion. Paulson & Co., the hedge fund mentioned by the SEC in connection with the Goldman Sachs matter, is the largest owner, the data show. Paulson wasn't accused of wrongdoing by the agency.
"It's just a bloodbath," said Matt Zeman, a metals strategist at LaSalle Futures Group in Chicago. "Gold was hanging tough until the Goldman news. You've got sell stops being triggered and that's why you have this landslide selling."
Gold, which rallied to a four-month high of $1,170.70 on April 12, was poised for a correction, said Michael Guido, the director of hedge-fund sales at Macquarie Bank Ltd. in New York.
"I don't think you're getting people who are looking at the Goldman news and saying, 'Let's get out of gold,'" Guido said. "The market's been in a technical slump, it's fighting against a stronger dollar and the GLD ETF has hit a record. Everybody was in on the same side."
Holdings in the SPDR ETF have been unchanged at a record 1,141.04 metric tons since April 12.
Also in New York, silver futures for May delivery fell 75.8 cents, or 4.1 per cent, to $17.675 an ounce on the Comex, also the biggest decline since Feb. 4. The metal fell 3.7 per cent for the week.
Platinum futures for July delivery declined $31, or 1.8 per cent, to $1,695.30 an ounce on the New York Mercantile Exchange, capping a 1.9 per cent loss for the week. June palladium futures fell $14.05, or 2.6 per cent, to $531.85 an ounce, narrowing the week's gain to 3.6 per cent.