Gold declined for a third day in London as concerns that China’s economy is slowing and European leaders may fail to stem the region’s debt crisis boosted the dollar, damping demand for alternative investments.
European leaders clashed over joint debt sales at a summit yesterday as new French President Francois Hollande challenged Germany’s deficit-cutting orthodoxy. German business confidence fell more than economists forecast in May as speculation that Greece might leave the euro area clouded the economic outlook. That helped drive the dollar to the highest since Sept. 13, 2010, against a six-currency basket and the euro to the lowest since July 6, 2010, against the greenback today. China’s manufacturing may shrink for a seventh month in May, a private survey showed today.
“The sentiment is still fairly downbeat,” said Andrey Kryuchenkov, a London-based analyst at VTB Capital. “Today we expect some more choppy trading with attention on the euro. Even though we still trade with riskier assets, the correlation can weaken should sentiment worsen even more.”
Spot gold lost 0.4 percent to $1,555.90 an ounce by 10:04 a.m. in London. June-delivery bullion rose 0.5 percent to $1,555.40 an ounce after dropping by the most in two weeks yesterday on the Comex in New York.
“Early signs of a U.S. recovery, a slowdown in Chinese growth, question marks over U.S. monetary policy and a sovereign debt crisis brewing in Europe all keep the market in wait-and- see mode,” Lachlan Shaw, an analyst at Commonwealth Bank of Australia (CBA), wrote in an e-mail today. “Any of these four catalysts can drive prices and investment demand.”
Central Bank Purchases
Central banks continued to buy bullion in April as Turkey raised its reserves by 29.7 metric tons and Ukraine, Mexico and Kazakhstan also increased their holdings, International Monetary Fund data show.
Holdings in the SPDR Gold Trust, the biggest bullion-backed exchange-traded fund, expanded 0.2 percent to 1,268.15 tons yesterday, after sliding 17.5 tons on May 22, the biggest such drop since Aug. 24, according to figures on the company’s website.
Spot platinum, the best performing precious metal this year, fell 0.5 to $1,417.50 an ounce. Silver was little changed at $27.785 an ounce. Palladium was little changed at $593 an ounce, after dropping to $587 yesterday, the lowest price since Nov. 30.