MW: Gold futures head for third straight session decline
Market weighs prospects of change to Fed’s monetary policy
By Myra P. Saefong and Barbara Kollmeyer, MarketWatch
SAN FRANCISCO (MarketWatch) — Prices for gold fell on Monday, as worries that the U.S. Federal Reserve will ease back on its easy monetary policy helped position the precious metal for a third straight session decline.
Gold for June delivery GCM3 -0.32% fell $3.60, or 0.3%, to $1,433 an ounce on the Comex division of the New York Mercantile Exchange.
Futures prices tallied a loss of 2.5% over the past two trading sessions.
Investors considered the possible curtailing of monetary-policy stimulus by the Fed. The central bank’s easy monetary policy tends to raise the risk of inflation, as well as put pressure on the dollar. Gold is seen as a hedge against inflation and as a dollar-denominated commodity, can benefit from a weaker dollar.
The central bank has reportedly mapped out a plan for winding down its program of buying $85 billion in bonds each month. Officials were trying to clarify the strategy so markets don’t overreact to their next moves, according to a report in The Wall Street Journal.
Recent strength in the dollar, “combined with general weakness in the commodities markets has investors worried about deflationary forces taking hold,” said Vedant Mimani, lead portfolio manager of the Atyant Capital Global Opportunities Fund. “As such, we are seeing the ‘inflationists’ exiting gold.”
In recent dealings, the dollar index DXY +0.14% was little changed from Friday, at 83.135, but it had climbed earlier to as high as 83.360. Last week, the greenback traded above 100 Japanese yen for the first time in four years.
Bringing the Fed’s bond-buying program to an end would make the U.S. dollar more attractive in terms of yield, analysts have said.
Meanwhile, declines in holdings in gold-backed exchange-traded funds remained a concern in the market. Gold holdings in the SPDR Gold Trust GLD -0.69% fell about 11 metric tons to 1,051.65 metric tons as of Friday from a week earlier. Declines in gold holdings in the largest U.S. gold-backed ETF have been cited among the reasons for the nearly 8% drop in gold futures in April. Read: 'ETF revolution' in gold bloodies investors.
Some analysts said Asian demand for physical gold has been strong.
Christopher Louney, on the commodities research team at Barclays, said in a note Monday that there is greater risk of physical demand slowing for gold further, rather than sizeable ETF inflows, which pose downside risk to prices in the near term.
“Should physical demand support prices to the $1,500/oz level, the risk of continued ETF outflows would subside, but the outperformance of equity markets is likely to continue to cap upside momentum and, indeed, weigh upon prices,” he said. Read: 'Extraordinary' jump in India gold imports won't last, say analysts.
On the data front, gold stuck to its losses after a report on Monday showed U.S. retail sales rose 0.1% in April, exceeding Wall Street’s forecasts.
A batch of China data showed industrial production and fixed-asset investment missed expectations. Retail sales met the expectations of a Reuters poll of analysts, and improved on retail-sales gains from earlier in the year, but still were worse than the level seen in 2012.
On Comex, silver for July delivery SIN3 +0.24% was up 1 cent at $23.67 an ounce, and copper for July delivery HGN3 +0.15% traded little changed at $3.35 a pound.
Platinum, palladium inventories drop
Platinum and palladium prices traded on a mixed note following a report showing that supplies of both metals swung to a deficit last year.
June palladium PAM3 +0.61% rose $2.45, or 0.4%, to $708.15 an ounce. July platinum PLN3 -0.55% , fell $6.10, or 0.4%, to $1,479.90 an ounce.
Johnson Matthey reported on Monday that platinum inventories hit a 12-year low in 2012, causing that market to swing into a supply deficit from a surplus owing to a steep output fall from South Africa.
In 2012, primary supply of platinum fell by 13% to 5.64 million ounces and total demand dropped by 0.6% to 8.05 million ounces, the platinum group metals refiner and marketer said in its Platinum 2013 report.
For palladium, the market also swung to a 2012 deficit of 1.07 million ounces, from a surplus of 1.19 million ounces in 2011, owing to newly-mined supply declines and a two-thirds cut in sales of Russian state stocks.
Myra Saefong is a MarketWatch reporter based in San Francisco. Follow her on Twitter @MktwSaefong.
Barbara Kollmeyer is an editor for MarketWatch in Madrid. Follow her on Twitter @MWBarbaraKollmeyer. Carla Mozee in Los Angeles contributed to this report.
