NEW YORK/LONDON (Reuters) - Gold fell to a two-week low in Europe and New York on Wednesday as rising risk aversion boosted the dollar on the second day of gloomy U.S. economic news which prompted losses across the metals spectrum and took down oil and equities prices as well.
Spot gold was sharply lower at $928.10 an ounce in late New York dealings versus $936.95 an ounce late Tuesday.
August gold closed $11.90, or 1.27 percent, lower at $927.20 an ounce on the COMEX division of the New York Mercantile Exchange.
The COMEX gold range low at $925.20 dated back to July 15 and fell from a lower high at $940.90 an ounce.
Gold was brought down early after the U.S. durable goods orders fell by more than forecast, driving the dollar up to two-week highs against the euro, traders said.
The U.S. Commerce Department reported June durable goods orders fell 2.5 percent, the largest drop since January, after rising by a revised 1.3 percent in May, previously reported as a 1.8 percent surge.
The U.S. dollar climbed to a two-week high against the euro as steep losses in Shanghai’s stock market and the durable goods report reignited the greenback’s appeal as a safe-haven currency. <USD/>
The value of dollar-denominated gold tends to decline in overseas markets when the U.S. currency strengthens.
“I think (gold’s decline) was mostly the dollar appreciating quickly over the last two days. And weak oil prices also helped remove some support for gold as well,” CPM Group’s precious metals analyst Carlos Sanchez said.
Oil futures extended losses to fall about 6 percent, or $3.88, settling at $63.35 a barrel after U.S. government data showed a surprisingly large increase in crude inventories last week. <O/R>
VTB Capital analyst Andrey Kryuchenkov said the weak durable goods numbers had depressed stock markets and pushed the dollar higher. “(Gold) trades on the dollar and equities,” he said.
U.S. stocks fell on the durable goods data and investors fretted about China's equities slide. .N
Chinese stocks .SSEC dropped by the most in eight months on Wednesday, ending a five-day rally, on concerns banks could restrict lending. <MKTS/GLOB>
“There will be a moment of volatility because the end of the week sees more data coming out,” he said. “I think we can hold on $925 -- there is pretty good support there -- and I think we will not get lower than $920,” the analyst added.
Gold’s slide below $940 an ounce, a level that had been holding for over a week, sparked some technical selling by triggering automatic sell orders, traders said.
Late in the session, there was little reaction to a development in the International Monetary Fund’s planned sale of gold.
A senior IMF official said a planned sale of 400 tons of IMF gold would take place within a new central bank gold sales agreement now being negotiated. [nN29276568]
The IMF has provisionally agreed to sell the gold to raise resources for increased lending to poor countries. A final decision by all 186 IMF member countries on the sales is expected at IMF meetings in Istanbul in October and requires the support of 85 percent of the membership.
“I doubt gold moved on that, because some of it was stated when the news first came out in April. Once they release final details of IMF pact for central back gold selling limits, it should push prices somewhat,” said CPM Group’s Sanchez.
Regardless of the IMF’s final announcement, he added, central banks will sell much less than they have been over the last few years.
Investment demand for gold remained lackluster, with a further 3.36-tonne outflow from the world’s largest bullion-backed exchange-traded fund, the SPDR Gold Trust, adding to a recent retreat in ETF holdings. <GOL/SPDR>
Among other precious metals, platinum fell more than 2 percent to a low of $1,162, and was later at $1,170.50 an ounce against $1,193. Palladium at $251 was lower than $257 in late Tuesday trade.
Silver was at $13.25 an ounce, down from $13.70.
Editing by Christian Wiessner
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