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MARKETS - GOLD

Fluctuating gold prices bring new practices

4 min

Gold prices scored fresh lifetime peaks this week, reaching the 1000 dollar an ounce tag, but then fell to 900 dollars an ounce in the steepest weekly drop in half a century. (Report: A.Roy)

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HONG KONG, March 20 (Reuters) - Gold prices slumped more
than 2 percent to their lowest in a month and oil dropped as
doubts about the global economy continued to unnerve commodity
asset classes that had soared to record highs as early as this
week.


Asian resource and mining stocks fell, while renewed credit
crisis fears also dragged down indexes across the region just
one day after investors had cheered hefty U.S. interest rate
cuts and resilient results from leading U.S. investment banks.


European shares were expected to fall, with major indexes
seen down around 1.6 percent to 2.1 percent.


But the dollar gained against the euro after some initial
volatility on the back of the decline in commodity prices,
though volumes were reduced as markets in Japan were closed for
a public holiday.


"We're seeing a return to reality with regard to the
situation in the U.S.," said Savanth Sebastian, equities
economist at CommSec in Australia.


"The trend in the U.S. remains the same, credit markets
remain tight and possible writedowns can continue."


Gold tumbled more than 2 percent to as low as $920.30 an
ounce, its lowest since Feb. 20., after prices had already
slumped 6 percent on Wednesday in its biggest one-day
percentage drop in nearly two years. Bullion last traded at
$936.60.


That marked a severe retreat from a record $1,030.80 an
ounce hit on Monday, though prices are still up some 12 percent
so far this year.


Other metal prices from platinum to copper to silver also
came under heavy pressure amid concerns that a U.S.-led
economic slowdown could undermine global demand.


"I think we will probably see further falls in commodity
prices," said analyst Cai Luoyi at China International Futures.


"It is obvious that investors who cut their holdings due to
concerns on the U.S. economy are not likely to build up long
positions again in the near term."


Oil prices extended the prior day's slump into Asian trade
as well, with U.S. crude futures down 38 cents to $102.19 a
barrel, retreating sharply from a record $111.80 hit on Monday.


Commodity prices have soared this year as demand outpaced
supply, while a slumping dollar also lifted prices as it makes
purchases less expensive when done through other currencies.


STOCKS EXTEND SLUMP


The MSCI's measure of Asian stocks outside Japan fell 1.9
percent by 0620 GMT.


Concerns about a financial credit crisis returned after
Merrill Lynch said on Wednesday it sued a U.S. bond insurer to
stop it from backing out of credit guarantees, fuelling
speculation the U.S. investment bank may need to take further
write-downs.


Asian stocks have had a volatile week that started with
worries about more casualties following the fire sale of Bear
Stearns to JPMorgan & Chase.


But markets perked up mid-week following the U.S. Federal
Reserve's rate cut and better-than-expected results from
Goldman Sachs and Lehman Brothers


Shares in Australia and Hong Kong dropped more than 3
percent each on Thursday as resource firms such as BHP
Billiton, the world's biggest miner, and Petrochina, the
world's most valuable energy producer, slumped.


Shares in Singapore edged lower, though markets in China
gained 1.5 percent, in a technical recovery from recent sharp
losses.


Taiwan shares gained 1.9 percent amid hopes of better ties
with China after the country elects a new president on
Saturday, while South Korean shares ended flat, erasing earlier
losses as the slumping won currency lifted exporters.


The falls in commodity prices helped lift the dollar after
initial weakness earlier in the session, with the U.S .currency
reaching $1.5566 per euro up slightly from late U.S. trade, and
still off its recent record low against major currencies.
 

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