Gold May Decline as European Leaders Meet, ETP Holdings Drop

Bloomberg

By Maria Kolesnikova and Glenys Sim

Dec. 8 (Bloomberg) -- Gold, little changed in London trading, may decline for the first day in three as Europe’s leaders gather to lay the foundations for a fiscal union and holdings in exchange-traded products fell from a record.

European Central Bank policy makers meeting in Frankfurt will cut rates by a quarter of a percentage point to 1 percent, according to 53 of 58 economists in a Bloomberg survey. The ECB’s announcement will come hours before the start of a two-day meeting of European leaders in Brussels.

“The variety of official European meetings today and, more particularly, tomorrow, are a significant risk event,” said David Jollie, a precious-metals analyst at Mitsui & Co. in London. “Most of the market is happy to remain long ahead of the meeting but some more nervous investors may be choosing to flatten their positions, creating a little selling pressure.”

Gold for immediate delivery fell 0.2 percent to $1,738.57 an ounce by 10:46 a.m. in London. Gold futures for February delivery declined 0.1 percent to $1,742.50 an ounce on the Comex in New York.

Gold holdings in bullion-backed exchange-traded products dropped to 2,356.7 metric tons yesterday from the all-time high of 2,358.2 tons on Dec. 6, according to Bloomberg data. Gold has risen 23 percent this year.

Europe’s leaders will convene in Brussels to frame the fifth “comprehensive” solution in 19 months to a debt crisis that’s left Germany and France facing the threat of losing their AAA ratings from Standard & Poor’s.

Lease Rate

The interest rate for lending gold in exchange for dollars has dropped to the lowest on record as European banks tried to secure U.S. currency, according to data compiled by Bloomberg. The one-month lease rate fell to minus 0.57 percent on Dec. 6, the lowest based on data going back to January 1998.

Platinum traded at the biggest discount to gold in at least 24 years on concern a global economic slowdown will damp consumption of the metal that is also used in autocatalysts, while boosting demand for bullion as a protection of wealth. Spot platinum fell 0.5 percent to $1,519.25 an ounce.

One ounce of platinum bought as little as 0.8713 ounce of gold today, according to data compiled by Bloomberg starting from 1987. Gold has traded at a premium to platinum since the beginning of September.

Silver for immediate delivery gained 0.3 percent to $32.6287 an ounce, and palladium declined 1.1 percent to $670.75 an ounce.

--With assistance from Yi Tian in New York. Editor: John Deane
To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Maria Kolesnikova in London at mkolesnikova@bloomberg.net
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net