Finotec News Archive - August 29 2007
Gold Falls as Global Equity Markets Slide
Gold fell for a second day on concern a slump in global equity markets will reduce investment demand for the precious metal.
Rodian Rahnayev 
29 August 2007
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Gold fell for a second day on concern a slump in global equity markets will reduce investment demand for the precious metal.
Stocks in Europe, Asia and the U.S. fell on speculation a credit crunch will erode world economic growth, extending a slide that began last month. Gold reached a six-week low on Aug. 16 after investors sold the metal to raise cash as losses widened in U.S. subprime mortgages.
``You've still got the sub prime mess out there,'' said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois. ``With the stock market heading down, gold will be influenced a shade lower.''
U.S. stocks declined for a second day after Merrill Lynch & Co. said tighter credit markets will hurt earnings at financial firms.
``Gold have sold off during any hint of equity instability or subprime concerns,'' said Ralph Preston, a senior market analyst at futures brokerage Heritage West Financial Inc. in San Diego. ``When people want to be liquid, they sell the gold and silver they've been hoarding for the past several years.'' Wide price fluctuations in equity markets have also made gold investors more cautious, traders said.
A rally in the euro may boost gold. The metals have been following the currencies, so if we see a big move in the euro, we could see a break to the upside.
European central banks have sold 397 metric tons of gold since September, figures from the World Gold Council show. Sales in the past 11 months exceeded the 395.8 tons sold the preceding year. Under the Central Bank Gold Agreement, European central banks can sell up to 500 tons for the year through Sept. 26.
Finotec Analysis Team
29 August 2007
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