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Gold fever dampened { December 18 2002 } Original Source Link: (May no longer be active)
http://www.washingtonpost.com/wp-dyn/articles/A5409-2002Dec18.htmlhttp://www.washingtonpost.com/wp-dyn/articles/A5409-2002Dec18.html
Gold Fever Dampened, Digests Sharp Gains
Reuters
Wednesday, December 18, 2002; 5:32 AM
By Clare Black
LONDON (Reuters) - Gold paused for breath in Europe on Wednesday as dealers cashed in on an impressive rally, while a White House statement affirming its commitment to a strong dollar also pressured the precious metal, traders said.
Spot gold was trading at US$336.90/337.40 an ounce at 5:25 a.m. EST, well below Tuesday's 5-1/2 year peak of $341.70, but unchanged from New York's Tuesday close of $336.90/337.65.
"I think that we have seen the high, at least for the next week or so," said Greg Fan, senior dealer at NM Rothschild in Hong Kong. "I think that is true for gold as well as the euro."
Gold soared in brisk, nervy trade on Tuesday as a diving dollar, rallying oil prices and fears of a U.S.-led attack on Iraq triggered buying from all sectors.
"Technically, the market is overdone on the upside...and there is institutional and producer selling around," a senior London bullion trader said.
"I think it was a move too far for some of them yesterday and the more sensible ones started to take some profits and others are following on today."
The dollar was holding above recent multi-year lows on Wednesday after White House spokesman Ari Fleischer said that the administration backed a strong dollar
The greenback was lifted to $1.0260 per euro , more than half a cent above the previous session's three-year low, trimming the bullion buying power of European investors.
"The statement is rather putting gold under pressure, particularly if you look at the rand...there's selling coming out of South African this morning," the trader said.
Early on Tuesday, the rand had rocketed to 8.65 against the dollar , buoyed by surging gold prices, but it then lurched lower after a wave of offshore fund selling. By 1030 GMT, it was bid at 8.985 against the dollar.
Turnover in gold fell sharply in Asia on Wednesday compared with the previous two days, although Tokyo trade remained very active.
VOLATILE MOVES, EYES WAR RISK
Investors were still gauging the risk of another Gulf War after comments by the United States that there were problems with Iraq's weapon declaration.
U.S. officials said early on Wednesday that President Bush was likely this week to declare Iraq in "material breach" of a U.N. Security Council resolution on disarmament, but was not expected to cite it as an immediate case for war.
The market was expected to remain jumpy, with the high level of geopolitical and global economic uncertainty making investors reluctant to leave themselves open to risk.
War has often led to sharp prices spikes in gold, such as in August 1990 when the metal gained over $60 an ounce to breach $400 as Iraq invaded Kuwait.
The rapidity of the yellow metal's ascent -- it has gained some $17 in the past week -- could make it vulnerable ahead of the Christmas period.
"I would expect more profit-taking in gold," one trader said. "Although I certainly don't think people are going to start going short given what's going on in the world."
Analysts were looking for gold to test support at $335-333 initially, with some traders looking for the metal to retreat to $330.
"With the year end approaching...and gold recording gains of over 20 percent, it must be very tempting for holders of this safe-haven metal to lighten their positions and book some profits," Standard Bank London said in a report.
Other precious metals were also subdued, with silver down to $4.61-4.63 an ounce, versus $4.63/4.65.
Platinum was indicated at $596.00/601.00 falling from New York's previous $609.00/612.00, while palladium ticked down to $237.00/242.00 from $239.00/244.00.
© 2002 Reuters
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