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Gold steady as Ireland offsets dollar impact

November 17, 2010 3:52 by


Gold steadied on Tuesday but remained near its lowest in nearly two weeks as a stronger

dollar kept commodities under pressure, partially offsetting the

lift to bullion from concern over the Irish debt crisis.

While gold often benefits from heightened investor aversion

to riskier assets, it has been swept lower in the broad sell-off

that has knocked copper, crude oil and grains, which have in

turned suffered from mounting expectations for more monetary

tightening in top raw materials consumer China.

Coupled with flows out of hard assets was a cooling towards

bullion from some of the world’s best-known gold bulls.

The most recent quarterly securities filings showed George

Soros cut his exposure to gold in the last quarter, along with

Eric Mindich.

Spot gold was little changed at $1,361.90 an ounce by

1005 GMT, after falling to $1,354.99 in the previous session,

its lowest in nearly two weeks. U.S. gold futures fell

0.5 percent to $1,361.6 an ounce.

“Commodities generally are on the back foot at the moment

… everything feels a bit on hold. We’ve had a pretty volatile

period over the last couple of weeks and things seem to have

blown themselves out for the time being,” said Scotia Moccatta

head of precious metals Simon Weeks.

“Gold is wrapped up in the commodities story, which is often

the case in the short term and then it often recovers as a

currency afterwards.”


Euro zone finance ministers will try to find a way to end

Ireland’s debt crisis on Tuesday, with Dublin resisting pressure

to seek a state bailout by signalling that only its banks may

need help.

The dollar is holding around six-week highs against the

euro, driven by concern about Ireland’s spiralling debt service

costs and rising U.S. Treasury yields, which prompted the

largest fall in the Reuters-Jefferies CRB index in

19 months late last week.

But several analysts echoed the view that the current

decline in gold prices would likely be temporary.

“Pressure on interest rates has in our view been one of the

key drivers behind the latest precious metals rally,” said

Credit Suisse in a note.

“However, we view the current pullback across the sector as

temporary as we expect the fundamental backdrop to remain


Speculation of more monetary tightening in China and other

Asian countries also worried traders. South Korea’s central bank

raised interest rates for the second time since the global

crisis and signalled further tightening as it shifted its focus

away from heavy fund inflows to rising inflation.

Traders in Asia said a decision by the Chicago Mercantile

Exchange to raise margin requirements for all four precious

metals could lead to additional liquidation.

Spot silver trimmed earlier gains to last trade at

$25.71, up 1.1 percent.

Platinum was unchanged on the day, while palladium edged

higher, ahead of the release of Johnson Matthey’s

closely-watched report of market balances and supply and demand

outlooks for the two metals at 1300 GMT.

Platinum fell to $1,660, its lowest in more than

three weeks, before recovering to $1,668.74 an ounce, unchanged

on the day. Palladium rose by 0.5 percent to $672.22 an


(Additional reporting by Rujun Shen in Singapore; Editing by

William Hardy)

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