TOKYO — Gold steadied near $1 175 per ounce today, well above one-week lows hit the previous business day, as Dubai debt default fears ensured bullion’s safe-haven appeal stayed intact. News that two Dubai flagship firms planned to delay repaying billions of dollars in debt renewed credit fears and initially pushed gold down 5% on Friday as investors sold off gold to raise cash to cover losses in equities as well as oil and other commodities.
As the dollar’s broad rise on its safe-haven aspect fizzled, gold pared some of the losses, with the sell-off offering buying opportunities to some investors who had lagged when bullion raced to record highs almost daily in the past couple of weeks. “Even when gold succumbs to cashing out, it faces renewed demand on the dips because of its safe-haven appeal against financial jitters,” said Hiroyuki Kikukawa, general manager in the market research department at Nihon Unicom in Tokyo.
Spot gold (XAU=) was at $1175,80 per ounce as of 0252 GMT, little changed from New York’s notional close of $1 176,70. Bullion hit a low of $1136,80 an ounce on Friday, the lowest since Nov. 20. While bullion is about 2% below its record high of $1 194,90 hit last week, it is on track for a rise of more than 12% in November, which would be its biggest monthly gain in a year. US gold futures for December delivery (GCZ9) were also steady at $1 176,10 per ounce, compared to $1 174,20 an ounce in the COMEX division of the NYMEX. The United Arab Emirates’ central bank set up an emergency facility on Sunday to support bank liquidity in the first policy response to Dubai’s debt woes, which threatened to paralyse lending and derail economic recovery.
UAE markets will face intense selling pressure when they reopen on Monday in the first post-holiday trading after Dubai shocked global markets last week by seeking a debt standstill for two flagship firms. Investors are especially keen to discover whether the six-month “standstill” on debt repayments involving the two firms will be voluntary. If creditors are not given a choice, the restructuring will be viewed as a default.
Asian stock markets made a tentative recovery after last week’s steep sell-off over the Dubai debt crisis as investors’ nerves steadied on hopes that the fallout of a potential default would be limited. The dollar eased on Monday after the UAE central bank’s moves, pausing from sharp gains made last week when fears of a possible Dubai debt default boosted the greenback’s safe-haven appeal.
Kikukawa said gold could be dragged lower if the euro was sold heavily against the dollar and as financial institutions prepare to close their books for the year. “There is a near-term possibility that gold may fall as speculative positions are unwound, but the market will likely be underpinned by demand at lower price levels,” he said, adding that gold was likely to find support around $1 100. Expectations for more central bank buying of bullion in its reserves also lent support, traders said.
Bullion’s rise to a record high was triggered by expectations that central banks in emerging countries will keep buying bullion from the International Monetary Fund. The IMF said it had sold gold to the central banks of Sri Lanka, India and Mauritius.