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Gold declines as US and European shares rally to curb safe haven demand

Published: 00:22 09 Jul 2010 AEST

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Gold was in decline today as safe haven demand faded amid yesterday’s rally in global stock markets, which continued into today. Stocks in the US, Asia and then Europe rose after US custody bank State Street said it was on track to beat Q2 expectations, boding well for the upcoming corporate reporting season.

Prior to the ongoing surge, the markets had been declining for two weeks under pressure from disappointing US and Chinese manufacturing updates and last week’s US jobs data, which showed a drop of 125,000 in non-farm payrolls mostly due to the loss of temporary census jobs and just 83,000 new jobs in the private sector.

This, coupled with continuing worries over Europe’s debt woes, pushed the Dow Jones Industrial Average in the US and the UK’ FTSE 100 below key levels of 10,000 and 5,000 respectively. Following yesterday’s surge of 2.8% in the Dow Jones index and today’s gains in UK markets, both indexes have climbed back above the psychological levels.

In other news, both the Bank of England and the European Central Bank decided to leave their respective interest rates unchanged today.

The safe haven gold normally moves inversely to the stocks, last week, however, the yellow metal suffered heavy losses, plummeting from US$1,266/oz to below US$1,200/oz as investors were dumping the asset to cover up the losses in equities.

Gold slid to US41,198/oz, while silver and platinum slid to US$17.99/oz and US$1,525/oz respectively.

Most mining stocks posted gains today. Gold miner Randgold Resources (LON:RRS) was an exception, staying at the opening level. Silver miner Fresnillo (LON:FRES) and platinum producer Lonmin (LON:LMI) advanced 3.1% and 2.4% respectively.

Specialty chemicals firm Johnson Matthey (LON:JMAT) added 1%.

Silver producer Hochschild Mining (LON:HOC) led the midcaps with a 2.9% gain. Gold miner Petropavlovsk (LON:POG) and Aquarius Platinum (LON:AQP) climbed 2.4% and 1% respectively.

Commodity asset development company Mercator Gold (LON:MCR) and Uzbekistan focused gold miner Oxus Gold (LON:OXS) were among the top performing stocks in the sector with gains of 6% and 5.5% respectively. Copper and gold miner EMED Mining (LON:EMED) and Brazil focused gold miner Horizonte Minerals (LON:HZM) climbed 5%.

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