Gold prices dropped for the first time in seven days in London as some investors sold the metal after concerns about slowing economic growth pushed prices to a record above US$1,910 an ounce yesterday.
Bullion is up 16 percent this month, heading for its best monthly performance since September 1999.
In earlier Hong Kong trading, gold prices soared above US$1,900 an ounce for the first time as dealers flocked to the safe haven asset due to growing concerns about the state of the global economy. In Singapore, spot gold soared to an all-time high above US$1,910 yesterday, before easing to trade flat at US$1,897.05 by 2:26pm.
Gold prices touched an all-time high on speculation US Federal Reserve Chairman Ben Bernanke will signal additional measures to stimulate the economy later this week and as debt crises spurred demand for a protection of wealth.
Gold’s rally in the past several weeks “surprised most in the market, even those in the most bullish camp,” Edel Tully, an analyst at UBS AG in London, said yesterday in a report. “Given the speed of the recent rally, the possibility of a correction is rising as investors look to bank profits. Even if a US$150 or more pullback were to materialize, we’d strongly view it as a good buying opportunity.”
Gold for immediate delivery fell US$12.42, or 0.7 percent, to US$1,885.18 an ounce by 8:38am in London, erasing a gain of as much as 0.8 percent to US$1,913.50. Gold for December delivery was down 0.2 percent at US$1,888.10 on the COMEX in New York after touching a record US$1,917.90.
The precious metal may reach US$2,000 by Dec. 31, extending this year’s gain to 41 percent, the most in more than three decades, according to the median forecast in a Bloomberg survey of 13 traders and analysts at a conference in Kovalam, India, on Saturday.
The Shanghai Gold Exchange, China’s largest spot market for the precious metal, will increase the margin by 1 percentage point, joining other bourses in an effort to curb volatility after prices gained to a record.
The requirement will be lifted to 12 percent from 11 percent for forward contracts from settlement tomorrow, the bourse said in a statement posted on the Web site yesterday.
The maximum daily price move will be increased to 9 percent from 7 percent, the exchange said. Margins and commissions on silver contracts may also be increased if volatility gains, it said.
CME Group Inc, the world’s largest futures market, raised the margins on gold contracts by 22 percent from Aug. 11 after prices surged.
“The Shanghai exchange’s move to raise margin requirements and cap daily price volatility is modeled after the CME’s similar move, and out of its need to control risks,” Wei Chishan, a precious metals analyst at Shanghai Metals Market, said by telephone yesterday.