BLBG: Gold Heads for Longest Slump Since March 2009 as Dollar Rally Cuts Demand
Gold headed for the longest slump since March 2009 as gains in the dollar reduced demand for precious metals as alternative assets.
The dollar climbed as much as 0.6 percent against the euro as Italian bonds fell after the nation raised less than its maximum target at a debt auction. Gold prices, down 12 percent in December, are headed for the biggest monthly drop since October 2008 as the greenback rallied almost 3 percent against a six-currency basket.
“The developments in Italy have perked up the dollar, and that is pushing gold down,” Sterling Smith, an analyst at Country Hedging Inc. in St. Paul, Minnesota, said in a telephone interview. “I expect gold to remain in the negative territory this week.”
Gold futures for February delivery declined 1.9 percent to $1,534 an ounce at 9:51 a.m. on the Comex in New York. The metal headed for a sixth straight day of declines, which would be the longest slide since March 4, 2009. Earlier, prices dropped to $1,523.90, the lowest since July 7.
Still, gold was up 10 percent this year through yesterday, heading for an 11th consecutive advance. Futures climbed to a record $1,923.70 on Sept. 6 as investors and central banks bought the metal as a store of wealth.
“You have stagnating output and, on the demand side, jewelry consumption adapts to higher prices,” said Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland. “The fundamental investment case for gold is still intact.”
The interest rate (.LIBGO6M) for lending gold in exchange for dollars jumped to 0.2085 percent, the highest since July 2010. One-month lease rates fell to the lowest on record in December as European banks sought ways to secure the U.S. currency amid the region’s debt crisis.
Silver futures for March delivery declined 1.7 percent to $26.77 an ounce on the Comex. Before today, the metal was down 12 percent this year.
To contact the reporters on this story: Debarati Roy in New York at droy5@bloomberg.net; Claudia Carpenter in London at ccarpenter2@bloomberg.net
To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net
