Gold falls $54 in one session

Spot gold is down sharply today, declining 3 per cent, or $54 per ounce from yesterday's close on global concerns. Gold was trading at $1,736 per ounce at around 7.15pm UAE time while 24ct gold was being retailed at Dh210.50 per gram, down from yesterday's 214.25 per gram, its highest level in almost two months.

With gold price rallying almost 15 per cent in seven weeks from the under $1,600 per ounce that it witnessed in late September, analysts are once again busy debating whether or not there is enough steam left in the bullion to cross the magical $2,000 per ounce barrier by the end of the year.

Spot gold prices fell yesterday to around $1,790 an ounce in Wednesday trading after rising to above $1,800 an ounce the day before – the first time since September 21 that the yellow metal managed to pierce the psychological resistance after its flash fall.

Yesterday, however, news that Italian Prime Minister Silvio Burloscini would resign once his country’s parliament approved strict austerity measures lifted investor sentiment and diverted fund-flow away from safe haven gold and into riskier equities, which rose as the other end of the see-saw – safe haven precious metals and commodities – declined.

Globally, demand for gold futures and exchange traded funds (ETFs) has seen a revival in the past couple of weeks, with a number of analysts sticking to their year-end forecasts of gold at $2,000 an ounce.

According to Standard Bank’s latest weekly report on Futures Market and ETF positioning, gold has seen two consecutive weeks of improvement in the net position along with a simultaneous drawing down of short positions, suggesting that the speculative market at last seems more confident about the yellow metal’s prospects.

“Open interest [in gold] built on the previous week’s gains, rising by 35.8 tonnes this last week,” said Standard Bank analyst Marc Ground, adding that net speculative length too increased moderately last week, with 31.2 tonnes added, and ETF buying continues to gain momentum, with 16.8 tonnes added during the week gone by (compared to the 12.2 tonnes and 4.7 tonnes added in the previous two weeks).

“These increases are encouraging, and underscores the growing confidence in the gold market,” Ground said.

Barclays Capital’s forecast for the fourth quarter is about $1,875 an ounce – approximately $100 per ounce above the current levels – and its average forecast for the next year is $2,000, or 12 per cent above current levels.

“We are bullish for gold and expect near-term buying interest near the daily cloud to underpin a move higher. A break above resistance at $1,775 would confirm our bullish view toward our target near $1,840,” the firm said in a research note Monday.

Even as Burloscini’s offer to resign and the probability of another, pro-austerity political leaders have pushed up investment sentiment in the near term, most analysts remain cautious of Europe’s debt troubles in the long term and see today’s gold dip as temporary at best, with the $2,000 per ounce target firmly in place.

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