Gold fluctuates after tapping record atop $1,900

06-Sep-2011

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Metal wavers between small gains and losses

By Claudia Assis and Myra P. Saefong, Market Watch
SAN FRANCISCO (MarketWatch) — Gold futures touched a record above $1,900 an ounce on Tuesday but lost some steam as the trading session progressed, fluctuating between small gains and losses.
Gold hit an intraday record of $1,923.70 an ounce on steep declines in U.S. and overseas stock markets and a move by the Swiss to defend its currency, which boosted the metal’s appeal as a safe-haven investment.
Gold for December delivery GC1Z +0.11% rose 20 cents to $1,877.10 an ounce on the Comex division of the New York Mercantile Exchange.
Investors’ “worst fears” about a deeper selloff for stocks haven’t materialized, taking some wind out of gold’s sails, said Frank Lesh, a broker with FuturePath Trading in Chicago.
The contract had pared some of its gains after the Institute for Supply Management on Tuesday said its service-sector index rose to 53.3% in August from 52.7% in July, defying economists’ forecasts for a decline.Read more about the ISM data.
The December gold contract had risen as high as $1,908.40 an ounce on Monday, according to data from FactSet Research, though all trade was electronic, as floor trade was closed for the U.S. Labor Day holiday.
“We saw gold surging through session highs, as euro-zone debt concerns continued to plague financial markets,” said Ong Yi Ling, investment analyst at Phillip Futures in Singapore.
The latest stumbling block in Europe’s ongoing sovereign-debt crisis included a suspension of talks between Greece and its regional lenders, as well as pressure on Italy to step up its austerity measures.
On Wednesday, Germany is due to receive a domestic court ruling on the legality of its euro-bailout contributions, which “could reduce the freedom of Germany to help other indebted nations,” Ong said.
“In the short term, gold prices are going to be underpinned by many supporting factors, whether it’s euro-zone debt concerns, slowing growth in the U.S. and the potential for another round of quantitative easing,” she said.

Also providing support for gold was news that the Swiss National Bank set a floor for the euro/Swiss franc exchange rate at 1.20 Swiss francs, vowing to buy “unlimited quantities” of euros to defend the Swiss franc. Read full story about the Swiss central bank setting a floor for the euro-Swiss franc exchange rate.
“The SNB has once again clearly indicated that the so-called safe haven currency that is the Swiss franc is set to be debased alongside the dollar, the euro, the pound and all fiat currencies,” analysts at Goldcore said in a note.
With the ultra-low interest rates around the world, “central banks have shifted to exchange rate policy aiming to have the weakest currency in town. This is a game that everyone can’t win… but that doesn’t mean they won’t keep trying,” analysts at HSBC said in a research note to clients.
“One currency that will benefit most from this is the one that will not complain, gold,” they said.
Other metals
The broader metals complex kept their losses Tuesday.
December silver SI1Z -2.10% lost 88 cents, or 2%, to $42.15 an ounce.
Copper for December delivery HG1Z -1.70% shed 7 cents, or 1.7%, to $4.04 per pound.
Platinum for October delivery PL1V -1.34% slipped $21.30, or 1.1%, to $1,863.50 an ounce, while December palladium PA1Z -3.83% declined $21.30, or 3.5%, to $755.45 an ounce.


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