BLBG: Gold Falls Most in Two Weeks in N.Y. as Euro Strength Trims Haven Demand
Gold futures fell the most in two weeks as the euro’s rebound against the dollar reduced demand for the precious metal as a haven against European debt concerns.
The euro was little changed after topping $1.30 for the first time since May 10. Gold rose to a record $1,266.50 an ounce on June 21 and surged to all-time highs in euros, U.K. pounds and Swiss francs last month amid Europe’s fiscal crisis.
“There’s continued unwinding of the gold-euro trade,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “As the euro firms up, the risk premium comes off.”
Gold futures for August delivery fell $15.70, or 1.3 percent, to $1,192.60 at 10:55 a.m. on the Comex in New York. A close at that price would mark the biggest drop for a most- active contract since July 1. Before today, the metal gained 10 percent this year.
The euro headed for the third straight weekly gain. Gold traditionally moves in tandem with the euro as an alternative to the dollar. This year, as Europe’s sovereign-debt woes unfolded, investors sold euros and bought gold and dollars as stores of value.
“Gold in euro terms may now be a broken trade,” said Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter. Earlier this year, he recommended holding gold priced in other currencies.
‘Running for Exits’
Precious metals with wider industrial applications fell on speculation the U.S. economic recovery will slow, eroding demand for raw materials.
“Investors are running for the exits,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock, a broker in Chicago. “The slowdown in consumer spending and the worse-than-expected earnings are taking some of the bullishness out of commodities.”
Silver futures for September delivery fell 51.7 cents, or 2.8 percent, to $17.845 an ounce on the Comex.
Platinum futures for October delivery dropped $15.70, or 1 percent, to $1,518 an ounce on the New York Mercantile Exchange.
Palladium futures for September delivery declined $13.70, or 2.9 percent, to $453.50 an ounce.
U.S. equities tumbled after General Electric Co., Bank of America Corp. and Citigroup Inc. reported revenue that trailed estimates by analysts. Consumer confidence declined in July to the lowest level in a year.
Copper prices dropped as much as 2.7 percent. Energy futures also declined. The Reuters/Jefferies CRB Index of 19 raw materials fell as much as 0.9 percent.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
