Gold drops as US dollar climbs, Paulson sells third of SPDR stake
Gold prices were hit by the double whammy of a stronger US dollar and the news that billionaire John Paulson has decided to reduce hit holdings of the yellow metal by a third.
It was reported yesterday that Paulson's hedge fund Paulson & Co sold more than 10 million shares in the world's largest gold backed exchange traded fund SPDR Gold Trust worth nearly US$2 billion.
The sale came a few days after gold prices hit US$1,800, but failed to find enough support to stay above that level.
In addition, gold was pressured by another surge in the US dollar, which came as euro zone peripheral bond yields rose further, suggesting that changes in governments in Italy and Greece failed to convince investors that Europe has its debt problems under control.
Italy's new technocrat Prime Minister Mario Monti, who replaced Silvio Berlusconi last weekend, has now formed a new emergency government, which was sworn in today. The new government is facing an uphill battle in restoring confidence in the markets to keep its borrowing costs at sustainable levels and raise enough money to service its debts and avoid a default.
As yields rose, the euro fell against the US dollar, reducing demand for gold, which is seen as an alternative investment to the greenback.
Gold traded at US$1,771/oz, down US$10 from Tuesday's close. Silver fell 37 cents to US$34.20/oz and platinum dropped US$13 to US$1,625/oz.
Today's top risers in the sector were:
Kolar Gold (LON:KGLD), up 6.5 percent at 16.55 pence at midday
Highland Gold (LON:HGM), up 4.5 percent at 192 pence
Metals Exploration (LON:MTL), up 4 percent at 12.5 pence
Cluff Gold (LON:CLF), up 3 percent at 84 pence
The top fallers were:
Oxus Gold (LON:OXS), down 12 percent at 1.3 pence at midday
Triple Plate Junction (LON:TPJ), down 8 percent at 4.8 pence
African Consolidated Resources (LON:AFCR), down 6.5 percent at 2.81 pence
Ariana Resources (LON:AAU), down 4.5 percent at 5.01 pence
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