Gold drops on selling after rally to record; Silver reaches 31-year high

April 12, 2011 - 0:0

Gold declined in London as some investors sold the metal following its rally to a record and after the African Union said Libyan leader Muammar Qaddafi agreed to a cease-fire. Silver reached a 31-year high.

Libya’s revolutionaries said a plan proposed by the African Union and agreed to by Qaddafi won’t be acceptable if it allows the ruler and his sons to retain power. Germany warned that deficit- scarred Greece might need more financial relief as Portugal seeks an 80 billion-euro ($116 billion) aid package. U.S. reports this week may show inflation is quickening, economists said.
“Profit-taking has emerged” and “a further pullback could be seen” on news that Qaddafi accepted a peace proposal, James Moore, an analyst at TheBullionDesk.com in London, said in a report to clients Monday. Still “ongoing concerns of European Union debt, low interest rates and ongoing inflation concerns are bullish” for gold, he said.
Immediate-delivery bullion fell $8.21, or 0.6 percent, to $1,466.72 an ounce by 11:29 a.m. in London. Prices earlier Monday gained as much as 0.2 percent and rose to an all-time high of $1,478.18. Gold for June delivery was 0.4 percent lower at $1,467.60 an ounce on the Comex in New York after reaching a record $1,478.
Bullion was unchanged at $1,469.50 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from the afternoon fixing on April 8.
-----------Inflation expectations
The difference between yields on U.S. 10-year notes and Treasury Inflation Protected Securities, a gauge of traders’ expectations for inflation, widened to as much as 2.66 percentage points, the most since March 2008. Reports this week may show U.S. consumer prices rose 0.5 percent last month from February, and wholesale prices and the cost of goods imported into the U.S. climbed, according to Bloomberg surveys of economists.
After almost two months of fighting, Libyan rebels and troops loyal to Qaddafi have fought to a stalemate. Qaddafi agreed to accept a peace plan that called for a cease-fire with rebels, the African Union said. There was no mention of Qaddafi agreeing to step down.
Gold held in exchange-traded products rose 19.98 metric tons to 2,049.15 tons on April 8, the highest level since Jan. 24, data compiled by Bloomberg from ten providers show. UBS AG Monday raised its one-month bullion forecast to $1,500, from $1,450.
-----------Silver gains
Silver for immediate delivery climbed as much as 2.5 percent to $41.9525 an ounce, the highest level since January 1980, the year the metal reached a record $50.35 in New York. It last traded at $41.09. An ounce of gold bought as little as 35.16 ounces of silver in London Monday, the least since September 1983, data compiled by Bloomberg show.
“We continue to believe that silver will reach $50, based nearly exclusively on speculator activity,” Edel Tully, a UBS analyst in London, said Monday in a report to clients. “Silver could surge to $45 this week, before very quickly surrendering double-digit percentage gains. It takes a brave investor to buy silver right now.”
Silver ETP holdings gained 30.36 tons to 15,453.45 tons on April 8, the highest level since at least February last year, data from four providers show.
Palladium was down 0.6 percent at $792 an ounce after reaching $805.13, the highest price in a month. Platinum declined 0.9 percent to $1,798.35 an ounce. It earlier Monday reached a one-month high of $1,818.75.
(Source: Bloomberg)