Gold falls from 2-month high, physical buying lags

Eye on Equities  |  2014-06-25 06:06:02   |   By

Gold fell on Wednesday as physical buying dried up after prices jumped to their highest level in two months in the previous session, while silver also slipped from a three-month top.

Gold fell on Wednesday as physical buying dried up after prices jumped to their highest level in two months in the previous session, while silver also slipped from a three-month top.

Weaker equities sent gold to its highest since mid-April on Tuesday but the rally fell far short of gains seen on Thursday last week, when prices rose by the most in nine months on the U.S. Federal Reserve's lack of commitment to raise interest rates and violence in the Middle East.

U.S. gold was at $1,315.10 an ounce, down $6.20.

'People are buying less gold lately, compared with when the price was below $1,300. After gold crossed $1,300, we saw short covering but after that, there's not much interest. We heard some investors may want to sell back at $1,325 or $1,330,' said a physical dealer in Hong Kong.

The dealer was also cautious in his outlook for Singapore Exchange's planned physically backed gold contract.

The exchange said it will launch a physically deliverable gold contract to meet demand in Asia. The contract, expected to be launched in September, is the first wholesale 25 kilobar gold contract to be offered globally.

'I am not sure if individuals will buy such huge amounts of gold. I think they prefer smaller quantities,' the dealer said.

Apart from Singapore, China and Hong Kong are also launching gold contracts this year.

China must have a bigger influence on the global gold market being the top consumer of the precious metal, the head of state-backed Shanghai Gold Exchange (SGE) said, as the country targets establishing its own pricing benchmark.

Read More Gold slips, but on track for stellar week

Among other precious metals, silver, which often tracks gold, dipped to $20.81 an ounce. It had rallied to $21.14 an ounce on Tuesday, its highest since March 18.

Platinum and palladium were also weaker on easing concerns over supply as South African mine workers returned to the Marikana operations of platinum producer Lonmin after wage deals were signed to end a five-month strike.

In other markets, Asian shares fell on Wednesday, echoing losses on Wall Street as concerns about escalating violence in Iraq eclipsed stronger economic data.

Courtesy: CNBC