Gold rebounded in European trade after dipping below the $500 level following further heavy selling by Japanese investors.
Gold recovered to trade at $504.40/$505.20 in London having sunk a low of $493.70, dragged lower by the weight of selling by Japanese investors. The Tokyo Commodity Exchange had imposed daily price limits to curb volatility but these meant that investors were unable to clear all the sell orders they wanted. TOCOM has gradually raised the price limits this week from Y50 to Y100 and there has been more selling as a result.
After move of almost $50 in the gold price this week, Simon Weeks, director of precious metals at Scottia Mocatta, said this would deter many investors and leave the speculators and japanese investors to fight it out.
The fundamental picture appears strong with three major investment banks this week raising their forecast for the average gold price next year. Morgan Stanley raised its forecast by 19 per cent to $475, ABN Amro increased its forecast by 5 per cent to $510 and JP Morgan said it expected the price to average $558 in 2006.
The sell-off in gold prompted a retreat for platimum and palladium which retreated to their lowest levels for a month before staging a modest recovery. Platinum traded at $953/$958 a troy ounce while palladium recovered to $257/$261 a troy ounce.
Crude oil prices continued to hold below $60 a barrel with IPE Brent for February delivery trading 61 cents lower at $58.79 while Nymex February West Texas Intermediate traded at $59.60 a barrel.