Gold drops as Obama plan hits commodities January 23, 2010 - 8:16AM
Gold prices fell on Friday, touching a one-month low during the session, as President Barack Obama's proposal to limit risk-taking by banks pressured commodities across the board.
The US dollar's decline helped pick gold prices up off the session low.
Obama's plans to restrict banks or financial institutions from associating with a hedge fund or a private equity fund dented market sentiment in commodities. But Afshin Nabavi, head of trading at MKS Finance, said market fear of Obama's plan was out of proportion.
Spot gold hit a one-month low of $US1081.90, its weakest since December 23. It was last at $US1092.20 an ounce in late New York trade, down from $US1094.20 late on Thursday in New York.
Gold for February delivery settled down $US13.50, or 1.2 per cent, at $US1089.70 on the COMEX division of the NYMEX.
The Obama plan weighed on markets from equities to commodities, as analysts said threats of restrictions on financial risk-taking could dent investment flows. Wall Street fell about 2 per cent.
Obama said on Friday he wanted new financial regulations to protect taxpayers from "dumb decisions" by banks.
Analysts said underlying demand should support bullion.
"Gold prices may rebound next week on dollar weakness and bargain-hunting after prices fell below the $US1100 level," said Carlos Sanchez, precious metals analyst at CPM Group.
Sanchez said gold prices may get a boost once traders begin to roll over futures contracts to forward months.
Meanwhile, platinum and palladium prices tumbled on concerns the metals' recent run-up may have been overdone.
The launch of physically backed platinum and palladium exchange-traded funds in New York this month boosted investment interest in those metals, lifting prices.
"It's not surprising to see a correction. The run-up was so strong over the last weeks due to the high investment demand," said Eugen Weinberg, an analyst at Commerzbank.
"But this correction presents a buying opportunity in the longer term," he added.
