By Kim Kyoungwha
May 10 (Bloomberg) -- Gold declined from near a five-month high on speculation that an emergency fund agreed by European policy makers will be sufficient to contain sovereign debt risks and help sustain growth in the region.
Gold for immediate delivery fell as much as 1 percent to $1,196.10 an ounce, before trading at $1,197 at 3 p.m. in Singapore. The metal reached $1,213.07 on May 7, the highest level since Dec. 3, after equities in Europe and the U.S. extended declines on concern policy makers weren’t working fast enough to prevent debt problems spreading.
“Risk appetite is reviving as Europe took some action to address fiscal concerns in the region,” said Yu Kyung Kyu, a trader with Eugene Investment & Futures Co. in Seoul. “Gold has risen too fast too far, which is also likely to entice some people to lock-in gains.”
The euro advanced for a second day as European finance ministers agreed an unprecedented loan package worth almost $1 trillion and a program of bond purchases to stem the debt crisis and halt speculative attacks on the euro.
Asian stocks rose 1.5 percent, ending a five-day losing streak and the dollar fell 1.1 percent against a basket of six major currencies.
Gold has strengthened 9.2 percent this year as escalating financial turmoil in Europe fanned demand for safer assets, including the dollar. Gold priced in euros, sterling and Swiss francs touched records last week.
Increasing Bets
Hedge-fund managers and other large speculators increased bets on rising gold prices to a four-month high in the week ended May 4, according to U.S. Commodity Futures Trading Commission data.
Net-long positions in gold, the difference between orders to buy and sell the metal, rose 2 percent to 230,547 contracts on the Comex division of the New York Mercantile Exchange, the Washington-based commission said in its weekly report. It was the highest since the week ended Dec. 25.
Other precious metals took some attention from gold as palladium soared 2.3 percent to $525.40 an ounce and platinum climbed 1.2 percent to $1,682.10 an ounce. Silver for immediate delivery was little changed at $18.3575 an ounce.
Still, reduced car-sale incentives in China and a slowdown in purchases by investment funds signals palladium may be ending a 16-month rally against platinum.
“With the precious metals delivering some of the greatest returns of any asset class so far in 2010, it is unsurprising to see some degree of profit-taking,” Hussein Allidina, New York- based head of commodity research with Morgan Stanley, wrote in a report today.
To contact the reporter on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.net
From Bloomberg Published Last May 10, 2010 03:28 EDT
