Gold Falls on U.S. Housing, Credit Woes; Silver Little Changed
By Feiwen Rong
Aug. 28 (Bloomberg) -- Gold fell in Asia as equities markets declined on a U.S. housing slump and credit crisis, fueling concern that investors may sell precious metals to cover losses and reduce risks. Silver was little changed.
U.S. stocks dropped yesterday after a report by the National Association of Realtors showed sales of previously owned houses fell in July to a five-year low, and the glut of unsold homes rose to a 16-year high. Asian stocks declined today amid renewed concern about losses linked to U.S. subprime mortgages.
``There are still people worrying about the subprime loan situation and fear that it's not over,'' Ng Cheng Thye, head of the precious metals desk at Standard Bank Asia Ltd., said by phone from Singapore.
Gold for immediate delivery fell $1.07, or 0.2 percent, to $666.53 an ounce at 2:59 p.m. in Singapore. Silver for immediate delivery was little changed at $11.75 an ounce.
Gold rose the most since June on Aug. 24 after a decline in the value of the dollar increased the appeal of the precious metal as an alternative investment.
``Given the size of move on Friday, you wouldn't be surprised to see prices backpedaling a bit, I don't think the fundamentals altered terribly much,'' Rowan Menzies, chief commodity analyst at Sydney-based Commodity Warrants Australia.
``Silver might be taking more of a lead from the stock market at the moment because of the industrial component of the silver,'' Menzies said.
Interest Rate
The Morgan Stanley Capital International Asia-Pacific Index fell 0.2 percent to 149.69 at 2:39 p.m. in Tokyo. Japan's Nikkei 225 Stock Average lost 0.1 percent to 16,292.07.
For gold ``the underlying story is still U.S. dollar and interest rate,'' Menzies said. Bullion, often viewed as an alternative asset when the dollar is falling, generally moves in the opposite direction to the U.S. currency.
Gold would benefit from a possible cut in U.S. interest rates to stem losses in credit markets and sustain growth, as the dollar would likely decline.
``The odds of the Fed not cutting interest rates are very slim,'' Dennis Gartman, economist and editor of the Gartman Letter, said today in a Bloomberg television interview.
In Japan, gold for delivery in June fell by 18 yen, or 0.7 percent, to settle at 2,500 yen a gram ($672 an ounce) on the Tokyo Commodity Exchange.
Gold for December delivery was little changed at $675.70 an ounce on the Comex division of the New York Mercantile Exchange at 3:04 p.m. Singapore time.