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Gold stabilises at $1,180, silver and platinum decline

Published: 10:27 20 Jul 2010 EDT

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Gold prices extended yesterday’s losses, at one point sliding below US$1,180/oz before the demand from bargain hunters provided enough support for the yellow metal to hold on to that level. The safe-haven gold, which has experienced a demand boost this year as Europe’s fiscal crisis unravelled, received little support from yesterday’s downgrade of Ireland’s sovereign rating to Aa2 by Moody’s.

Gold fell from record highs of US$1,265/oz a few weeks ago before a huge sell-off in global stock markets caused traders to dump gold to make up for losses in equities, which drove the yellow metal down to US$1,200/oz. Increased buying by bargain hunters proved to be enough to keep it at that level until this week.

The prices have been under pressure from last week’s US CPI (consumer prices index) update, which revealed a 0.9% drop in US prices, cooling inflation fears and cause gold, which is seen as an inflation hedge, to fall out of favour.

Traders are now actively selling bullion on concerns that it has been overbought and there is not enough support for the current price level to be sustainable in the long run. According to US Commodity Futures Trading Commission data, hedge funds lowered their long positions on gold to 2% last week, which is the lowest level since April.

Gold last traded at US$1,183/oz. Silver and platinum declined to US$17.58/oz and US$1,497/oz respectively.

Major mining stocks showed little movement today. Randgold Resources (LON:RRS), platinum miner Lonmin (LON:LMI) and silver miner Fresnillo (LON:FRES) posted small gains.

Specialty chemicals firm Johnson Matthey (LON:JMAT) declined 1.2%.

African Barrick Gold (LON:ABG) did better, rising 1.4%.

Aquarius Platinum (LON:AQP) recovered from recent losses, surging 11%. Other midcaps, gold miner Petropavlovsk (LON:POG) and silver producer Hochschild Mining (LON:HOC) slid 1.2% and 2.6% respectively.

Argentina focused gold explorer Patagonia Gold (LON:PGD) was the top performing junior with an 11% rally. Turkey and Saudi Arabia operating gold explorer KEFI Minerals (LON:KEFI) was in the red with an 8% loss. Africa focused gold miner Pan African Resources (LONPAF) and Turkey and Ethiopia operating gold miner Stratex International (LON:STI) shed more than 6%.

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