Bloomberg News

Gold Declines for Second Day as Paulson Cuts Bet, Euro Weakens

November 15, 2011

Nov. 15 (Bloomberg) -- Gold dropped for a second day as the euro held losses against the dollar on concern that Europe will struggle to contain its debt crisis and as billionaire John Paulson cut his holdings by 36 percent in the SPDR Gold Trust.

Bullion for immediate delivery lost as much as 0.8 percent to $1,765.53 an ounce before trading at $1,770.85 at 3:23 p.m. in Singapore. December-delivery gold declined 0.4 percent to $1,771.50 on the Comex in New York.

Italy’s borrowing costs surged to the highest level since 1997 at a note sale yesterday, while 10-year Spanish yields climbed 25 basis points to 6.11 percent. That helped send the euro lower against the dollar before a report today that economists say may show German investor confidence slumped to a three-year low as the debt crisis threatens growth.

“Gold has persistently derived safe haven-related purchases from the euro-zone sovereign debt crisis,” James Steel, an analyst at HSBC Securities USA Inc., wrote in a note. “This has been largely offset by currency-related selling of gold due to a weaker euro.”

Paulson & Co. cut its stake in the SPDR Gold Trust, the biggest exchange-traded fund backed by the metal, to 20.3 million shares in the third quarter from 31.5 million as of June 30, government filings showed. Soros Fund Management LLC raised its stake to 48,350 shares from 42,800, and Touradji Capital Management LP held 45,000 shares compared with none as of June 30, separate filings showed.

Gold ETPs

Total holdings in exchange-traded products backed by gold reached a record 2,330 metric tons on Aug. 18 and stood at 2,312.3 tons yesterday, data compiled by Bloomberg show. Bullion has rallied 25 percent this year, heading for an 11th year of gains, as investors sought to hedge against financial turmoil and diversify from declining equities and some currencies.

The Federal Reserve will keep interest rates low “for a number of years” to support the U.S. economy, said Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co. China faces “a steady buildup of financial sector vulnerabilities,” the International Monetary Fund said in its first formal evaluation of the Chinese system.

Cash silver declined 0.5 percent to $34.0575 an ounce, while futures were little changed at $34.04 an ounce. Spot platinum was little moved at $1,640.38 an ounce and palladium dropped 0.3 percent to $662.38 an ounce.

--Editors: Ovais Subhani, James Poole

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net


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