Gold prices fall as sellers step in before extended holiday weekend
Bullion metals ended lower on Friday, 15 February, 2008. The drop in precious metal prices was mainly witnessed due to the sell-off that was spurred for the early close of many markets on Friday and the close of all markets for the Presidents' Day holiday on Monday, 18 February. Silver prices ended lower for the day.
Gold generally moves in the opposite direction of the U.S. currency. Gold, as a dollar-denominated commodity, suffers from dollar strength.
Comex Gold for April delivery fell $4.7 (0.5%) to close at $906.1 an ounce on the New York Mercantile Exchange. On 30 January, 2008 prices had hit a high of $941 in the after hours trading. This year, prices have gained 9% till date. In January, prices gained 11%, the highest monthly gain since April 2006.
For the week, gold prices suffered a loss of $16.2/ounce (1.8%). Last week, gold prices closed higher by $8.8 (0.96%) against previous close of $913.5.
Comex Silver futures for March fell by 13.8 cents (0.8%) to $17.118 an ounce. Silver has gained 13.5% in 2008. The metal had climbed 16% in FY 2007. The metal also has gained for seven straight years. In January this year itself, prices climbed 14%.
U.S. stocks fell on Friday after reports showed confidence among U.S. consumers fell to a 16-year low and manufacturing in New York contracted this month for the first time in almost three years.
Gold had been dropping since this week after the Group of Seven officials meeting in Tokyo over the last weekend said they supported the International Monetary Fund's effort sell its gold reserves in order to invest in higher-yielding assets. The IMF is the third largest holder of gold in reserves after the U.S. Federal Reserve and the German central bank.
As per the London-based World Gold Council, the global gold demand dropped to 843 metric tons from 1,013.4 tons in the last three months of 2007. Buyers from India, the world's biggest user, reduced purchases by 64% in the last quarter to 83.9 tons. About 68% of gold demand last year came from jewelers and jewelry use dropped 17% in that time.
Gold might rebound in the coming week on speculation a slowing economy will spur the Federal Reserve to lower borrowing costs in the U.S, boosting the appeal of the precious metal as an alternative investment to the dollar.