Gold may ride safe haven wave next week
Monday, 29 November 2010
LONDON, Nov 28 (Commodity Online): Gold prices witnessed a fall towards end of the week with the dollar gaining strength following the Europe crisis.
However, with Spain and Portugal still in trouble gold may witness further safe haven demand in the coming week.
The price of gold plunged $22.35 to $1,353 per ounce Saturday as the US dollar rally picked up steam. The US dollar index broke back above the 80 level, trading at 80.45 on the back of weakness in the euro.
Gold prices have risen in tandem with the broader commodity complex as well as the global equity market. Therefore, despite being a counter-cyclical asset class, the gold price is sinking as investors liquidate portfolio positions of any and all kind.
Tensions in Korea, sovereign debt worries in Europe, and concerns over tighter monetary policy in emerging markets appear to be weighing on investors, which are dumping assets on what is usually a quiet day following the Thanksgiving holiday.
Further contributing to the sell-off in the gold price and other commodities was the Shanghai Futures Exchange's decision to increase margin requirements and widen daily price move limits on several of its products.
The exchange announced that effective at the close of business on November 29, margin requirements on gold, copper, fuel oil, aluminum, and steel wire rod will be raised to 10 per cent.
The move to raise margin requirements is yet another step by Chinese policy makers to ease the country's inflation pressures, particularly the surge in food prices.
However, with Spain and Portugal still in trouble gold may witness further safe haven demand in the coming week.
The price of gold plunged $22.35 to $1,353 per ounce Saturday as the US dollar rally picked up steam. The US dollar index broke back above the 80 level, trading at 80.45 on the back of weakness in the euro.
Gold prices have risen in tandem with the broader commodity complex as well as the global equity market. Therefore, despite being a counter-cyclical asset class, the gold price is sinking as investors liquidate portfolio positions of any and all kind.
Tensions in Korea, sovereign debt worries in Europe, and concerns over tighter monetary policy in emerging markets appear to be weighing on investors, which are dumping assets on what is usually a quiet day following the Thanksgiving holiday.
Further contributing to the sell-off in the gold price and other commodities was the Shanghai Futures Exchange's decision to increase margin requirements and widen daily price move limits on several of its products.
The exchange announced that effective at the close of business on November 29, margin requirements on gold, copper, fuel oil, aluminum, and steel wire rod will be raised to 10 per cent.
The move to raise margin requirements is yet another step by Chinese policy makers to ease the country's inflation pressures, particularly the surge in food prices.