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Market Savvy | SAVVY CONFIDENTIAL / A Briefing for
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Investors Staying Away From Gold Market

May 24, 2000|Bloomberg News

The traditional "safe haven" in times of stock market trouble isn't attracting much interest this time around.

Near-term gold futures fell Tuesday as Britain's sixth bullion auction attracted fewer bids than previous auctions, signaling declining investor interest.

May futures in New York eased $1.40 to $274.40 an ounce.

The Bank of England, which auctioned 25 metric tons of gold today, said bids were submitted for 66 tons, the lowest amount since November. Auctions in January and March generated bids for 100 tons and 75 tons respectively.

The gold auctioned Tuesday fetched $275.25 an ounce, the second-lowest level since the U.K. began selling bullion last July.

Gold's market price could fall as low as $270 an ounce in coming days, said Stephen Jones, an independent trader on the Comex. "It's definitely trending down." If gold reaches $270, he predicted the price then would head down toward $254, just above the 20-year low of $253.20 an ounce reached last July.

The U.K. has sold 150 tons from its reserves since July, part of a series of sales to reduce the country's bullion holdings from 715 tons to 300 tons over five years. The next auction is scheduled for July 12.

Total investor demand for gold plunged 46% in 1999, a year when German investors, traditional mainstays of the gold market, sold more of the metal than they bought for the first time since 1993, London-based Gold Fields Mineral Services said in an April report.

Overall global demand for gold rose 1% in the first quarter of this year from a year earlier, propped up by Asian buyers, though investor demand dropped 29%, the World Gold Council said this week.

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