NEW YORK/LONDON (Reuters) - Gold prices fell to $1,100 an ounce on Thursday, hitting their lowest level this year, as U.S. President Barack Obama’s plans to limit banks’ risk taking dampened investor sentiment across the board.
Gold remained under pressure after the White House proposed stricter limits on financial risk-taking, aimed to shore up the president’s own political base, that sent bank shares lower.
“Certainly it takes a toll on all investments products, especially commodities, since the banks were very heavily invested in the sector,” said Zachary Oxman of California-based TrendMax Futures.
Oxman said that the U.S. administration’s proposal could restrict capital flow and cut profits of banks, which provide the needed liquidity for gold and commodities investors.
Spot gold hit a low of $1,088.30 an ounce and was last at $1,101.10 an ounce at 1:24 p.m. EST, against $1,111.10 late in New York on Wednesday.
U.S. gold futures for February delivery on the COMEX division of the New York Mercantile Exchange settled down $9.40 at $1,103.20 an ounce.
Earlier in the session, the euro slumped to a nearly six-month-low due to concerns over a swelling budget deficit in Greece, which sparked worries about debt held by several other euro zone countries.
Bullion later rebounded from its session lows as the Obama proposal weighed down sharply on the dollar.
Daniel Major, an analyst at RBS Global Banking & Markets, said gold could fall further due to a resurgent dollar.
“There have been some reasonably positive signs from the jewelry market, but from the investment side, in the last two or three weeks, we have seen modest but persistent redemptions from the exchange-traded funds,” Major said.
Holdings of the world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Trust, were steady on Wednesday, but are down 21.7 tonnes or 1.9 percent this year. In the same period of 2009, they rose 22.7 tonnes.
Holdings of the main silver ETF, the iShares Silver Trust, have also fallen 154 tonnes in 2010 to date.
Traders say some investors with an interest in precious metals ETFs are pulling money out of the SPDR and the iShares fund in favor of new U.S. platinum- and palladium-backed ETFs.
Wall Street fell as much as two percent after Obama’s proposed rules to prevent the biggest banks from taking excessive risks..N <O/R>
In India, historically the world’s largest consumer of gold, traders continued to buy as prices hit new two-week lows, and that provided underlying support to prices.
Among other precious metals, spot platinum was at $1,596 an ounce versus $1,622.50, while palladium was at $453.50 versus $465.
Lease rates for the two metals have risen steadily since the launch of the ETFs operated by a U.S. unit of London’s ETF Securities, dealers said.
Silver was at $17.50 an ounce against $17.87, following gold lower.
Reporting by Frank Tang and Jan Harvey; Editing by Marguerita Choy