BLBG: Gold Falls as Demand Ebbs After Rally to $1,000; Silver Drops
Gold fell for the second straight day as demand ebbed following last week’s rally that sent the precious metal above $1,000 an ounce for the first time in 11 months. Silver also declined.
The seven-day relative-strength index on gold has been above 70 since Feb. 17, a signal that prices may drop in the short term. For the first time since Jan. 28, investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, was unchanged for two consecutive sessions. Assets in the fund rose 4.4 percent last week to a record 1,029 metric tons.
“If the ETF inflows do not start again within a day or two, some traders may attempt to test the downside of gold,” said John Reade, a metals strategist at UBS AG in London.
Gold futures for April delivery fell $23.20, or 2.3 percent, to $971.80 an ounce at 11:32 a.m. on the Comex division of the New York Mercantile Exchange. A close at that price would mark the biggest drop for a most-active contract since Feb. 9. Yesterday, the metal dropped 0.7 percent.
Before today, gold gained 13 percent this year. Last week, the price reached $1,007.70, the highest since March 18.
Silver futures for March delivery fell 27 cents, or 1.9 percent, to $14.18 an ounce. Before today, the metal jumped 28 percent this year.
Investment in ETFs helped drive gold and silver prices up this year. The gains by the metals this year have outpaced most of the components in the Reuters/Jefferies CRB Index of 19 raw materials.
Silver ETF Record
In 2009, assets in the SPDR Gold Trust have grown 32 percent, and investment in Barclays Plc’s iShares Silver Trust, the biggest ETF backed by silver, increased 20 percent, reaching a record 8,180 metric tons yesterday.
“Players had little to choose from as a motivator to load up on more bullion,” said Jon Nadler, an analyst at Kitco Inc. in Montreal. “The gold ETF is reflecting the same wait-and-see attitude.”
Still, a drop in prices may encourage investors seeking a haven from financial turmoil to buy precious metals, said Tom Pawlicki, an analyst at MF Global Ltd. in Chicago.
Federal Reserve Chairman Ben S. Bernanke said the U.S. recession may last until 2010 unless policy makers can stabilize the financial system.
Gold rose 6.4 percent last week as the Standard & Poor’s 500 Index fell 6.9 percent. Equities in Asia and Europe retreated today.
“Gold and other precious metals should continue to receive inflows of investment due to their outperformance of other asset classes,” Pawlicki said. “Support will continue to come from disappointment in efforts to stem the financial crisis, and the weakness in the stock market that has resulted.”
