BLBG: Gold Falls for Second Day as Gains in Equities May Curb Demand
Gold fell for a second day in London as a gain in equities may reduce demand for the precious metal as an alternative investment. Silver and platinum also declined.
European stocks advanced for the first time in four days, Hong Kong’s Hang Seng Index jumped 3.1 percent and futures on the Standard & Poor’s 500 Index added 2 percent. World economies may be approaching a turning point as interest-rate cuts and government spending start to stimulate growth, European Central Bank President Jean-Claude Trichet said.
“If risk perceptions ease, then of course you’ll see the appetite for gold do the same,” said Daniel Brebner, executive director of commodity research at UBS AG in London.
Gold for immediate delivery dropped as much as $13.05, or 1.4 percent, to $908.92 an ounce and was at $913.74 at 11:15 a.m. local time. Prices fell 1.9 percent yesterday.
April gold futures lost $4.10, or 0.5 percent, to $913.90 an ounce on the New York Mercantile Exchange’s Comex division.
Trading of gold options and other derivatives through ICAP Plc, the world’s largest broker of transactions between banks, and spot gold through its EBS electronic trading platform has declined because of limited credit, said Michael Greenacre, manager of precious metals at ICAP in London.
“A lot of our customers’ customers are the funds, and the funds are having a tough time,” he said. More trading is going to exchanges, he said.
Hedge Fund Jobs
Hedge funds may cut 20,000 workers worldwide this year, a record 14 percent of the industry’s jobs, as investment losses and client withdrawals erode fees, according to estimates by New York-based Options Group, an executive-search firm.
Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, were unchanged yesterday while investment in Gold Bullion Securities Ltd. on the London Stock Exchange rose 2,485 ounces to 4.09 million ounces, the highest since March 5, the ETF Securities Ltd. Web site shows.
Funds that own SPDR include Pequot Capital Management Inc. and Greenlight Capital Inc., according to U.S. government filings.
Gold will probably resume gains as investors purchase the metal as a hedge against inflation and deflation, Brebner said. UBS’s asset allocation team raised its rating for gold to “overweight” from “neutral” for the first time in at least a year, and the metal may rise to $2,500 in the next several years, Brebner said. Gold rose to a record $1,032.70 in March last year.
Bank Sales
The International Monetary Fund, the world’s third-largest government owner of gold, may have a profit of almost $650 million next year, former IMF officials said. The return to profitability may shelve plans to sell some of the IMF’s gold, an idea floated a year ago to create an endowment to finance operating costs.
European central bankers may extend their so-called Washington Agreement, capping gold sales at 500 metric tons a year, with an announcement as early as this month, according to John Reade at UBS.
“If it doesn’t happen this month, it could lead to a bit of uncertainty” in the gold market, he said.
Among other metals for immediate delivery, silver dropped 20.25 cents, or 1.6 percent, to $12.80 an ounce. Platinum declined $8.50, or 0.8 percent, to $1,052.50 an ounce and palladium fell $1, or 0.5 percent, to $196.50 an ounce.
