BLBG: Gold Declines After Gain Over $1,000 to Highest Since March
Gold declined in Asia as some investors sold the metal to lock in gains after it rallied above $1,000 an ounce last week for the first time in almost a year
Gold reached $1,006.29 on Feb. 20, the highest since March, as investors sought a haven from slumping equities. The metal has soared 45 percent from an October low of $682.41 as investor confidence in financial assets eroded and central banks pumped trillions of dollars into the banking system.
The cost of fiscal stimulus packages and a decline in tax revenues because of the global recession has left investors worried about “currency debasement and the possibility of higher long-term inflation,” John Reade, UBS AG analyst, said in a report. “We believe that it is these fears that have triggered the recent surge of investment flows into gold.”
Immediate-delivery gold fell as much as 0.8 percent to $985.46 an ounce, before trading at $987.71 at 2:44 p.m. in Singapore. Silver declined 0.6 percent to $14.35 an ounce. The metal has surged 26 percent this year, after dropping 23 percent in 2008, and is the best performer among the 26 contracts on the UBS Bloomberg Constant Maturity Commodity Index.
Investor demand for a haven has pushed gold holdings in exchange-traded funds to all-time highs. Bullion holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by the metal, gained to a record 1,028.98 metric tons Feb. 20.
Investment demand for bullion, including exchange-traded funds, coins and bars, almost tripled to 399 tons in the fourth quarter as total demand climbed 26 percent to 1,036.5 tons, the London-based World Gold Council said on Feb. 18.
Yen’s Gains
Investors are protecting their wealth by turning to gold from the Japanese yen, Morgan Stanley currency strategist Ned Rumpeltin said in a report. The yen has gained 18 percent in the past six months, the only major currency to advance against the dollar, almost matching the 20 percent gain in gold.
“In place of the Japanese yen, gold has made a comeback as a safe haven of choice” for some investors, the report said. Japan’s fourth quarter contraction of 13 percent at an annual rate, caused by a 35 percent shrinking of exports from a year earlier, “has seen some investors call the yen’s safe haven status into question.” The yen fell 1.6 percent last week.
Platinum for immediate delivery was little changed at $1,081.50 an ounce at 2:45 p.m. Singapore time after gaining in each of the past five weeks, while palladium gained 0.4 percent to $215.75 an ounce.
