Gold drops for third day on worries of global slowdown
NEW YORK |
NEW YORK (Reuters) - Gold fell for a third consecutive session on Tuesday as a stern warning by the International Monetary Fund on global growth and worries about a slowing Chinese economy lessened bullion's appeal as an inflation hedge.
The metal came under pressure as televised scenes of angry Greek protesters filled the streets of Athens to greet German Chancellor Angela Merkel, who offered no promise of further aid, dampened buying sentiment.
Also weighing on gold were remarks by China's central bank governor that China will keep monetary policy flexible and pre-emptive to support an economy still facing relatively big downward pressure.
A third straight day of decline sent gold well below an overbought level, and some analysts said the metal is due for a rebound because of money printing by central banks. The relative strength index (RSI) fell below 60, under the 70 mark at which a market is generally considered overextended.
On Tuesday, traders said China's central bank would flood money markets through reverse bond repurchase agreements for a second straight trading week.
"I do believe the slowdown in China will be much more severe than people anticipate and there is nothing the central bank can do to change it," said Jeffrey Sica, chief investment officer at SICA Wealth which manages over $1 billion in assets.
Spot gold was down 0.5 percent at $1,764.84 an ounce by 2:39 p.m. (1839 GMT), even though the price was still within reach of its 11-month high at $1,795.69.
U.S. COMEX gold futures for December delivery settled down $10.70 at $1,765 an ounce, with trading volume about 30 percent below its 30-day average, preliminary Reuters data showed.
Gold, a traditional inflation hedge, tends to weaken on signs of slowdown in China, the world's second-largest economy and often considered one of the top drivers of global growth.
The IMF said the global economic slowdown is worsening as it cut its growth forecasts for the second time since April and warned U.S. and European policymakers that failure to fix their economic ills would prolong the slump.
OIL RALLY, GEOPOLITICAL TENSIONS
Gold's drop was limited by a sharp rally in crude oil prices due to supply worries driven by heightened geopolitical tensions in the Middle East. <O/R>
Reflecting continued investor demand for gold against a worsening economic backdrop was another inflow of metal into exchange-traded products (ETPs), which brought global holdings to a fresh record by Monday's close.
Among other precious metals, silver eased 0.1 percent at $33.91 an ounce.
Platinum inched down 0.1 percent on the day to $1,685.10 an ounce.
The price of platinum has been underpinned by unrest that has swept through South Africa's platinum belt. Nearly 100,000 workers are on strike in the country and 75,000 of those work in the mining industry.
Several operations belonging to world number one producer Anglo American Platinum (AMSJ.J) remain shuttered, along with facilities belonging to other smaller miners.
Palladium eased 20 cents at $653.90 per ounce.
(Additional reporting by Clare Hutchison, Veronica Brown in London and Rujun Shen in Singapore; editing by Andrew Hay and Bob Burgdorfer)
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