Gold prices retreat as investors worry pledge to slash government deficits could affect demand
By APMonday, June 28, 2010
Gold prices fall as deficit cuts could hurt demand
NEW YORK — Gold prices retreated Monday after investors interpreted a pledge by world leaders to slash budget deficits as a sign interest rates could rise and hurt demand for the metal.
The G20, a group of rich and developing nations including the U.S., agreed over the weekend that industrialized nations would aim to slash deficits in half by 2013.
Jon Nadler, an analyst at Kitco Bullion Dealers, said there is a shifting philosophy among many governments to cut spending and raise taxes to control deficits. That move could push interest rates higher and eat into demand for gold.
Higher interest rates would also make some other investments like bonds more attractive and competitive with gold, particularly for investors looking for safer options that stocks, Nadler said.
Gold for August delivery fell $17.60 to settle at $1,238.60 an ounce.
The gold market could also be suffering from waning momentum, even though it reached new highs just last week, Nadler said.
Factors that have driven gold prices steadily higher in recent months have eased, such weakness in the euro. That kept gold from holding at record levels or significantly jumping above previous highs in recent days.
Other metals followed gold lower. Silver for September delivery dropped 43.4 cents, or 2.3 percent, to settle at $18.718 an ounce. Copper fell 2.15 cents to $3.0895 a pound.
Energy prices all fell as well. Priced dropped after it appeared Tropic Storm Alex would avoid areas where most oil rigs and refineries are located along the Gulf of Mexico. Benchmark crude oil for August delivery fell 61 cents to $78.25 a barrel.
In energy contracts for July delivery, heating oil fell 1.89 cents to $2.0933 a gallon, while gasoline dropped 3.02 cents to settle at $2.1376 a gallon. Natural gas fell 14.4 cents, or 3 percent, to settle at $4.717 per 1,000 cubic feet.
Grain and bean prices settled lower. Wheat for September delivery fell 6 cents to $4.65 a bushel, while corn settled 7.25 cents lower at $3.4225 a bushel. Soybeans fell 2 cents to $9.55 a bushel.
