BLBG:Gold Drops to 3-Week Low in Worst Run Since February on Dollar
Gold dropped for a fifth day in the worst run since February in London, falling to a three-week low, as a stronger dollar curbed demand for an alternative investment and bullion holdings declined. Other precious metals fell.
Holdings in exchange-traded products dropped 6.2 metric tons to 2,219.7 tons yesterday, the lowest since July 2011, according to data compiled by Bloomberg. The U.S. Dollar Index, a measure against six major currencies, reached the highest level since July today. Gold has retreated 16 percent this year, tumbling into a bear market last month, as some investors lost faith in the metal as a store of value and equities rallied.
“The dollar is doing well,” Peter Fertig, the owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said today by phone. The ETP selling “is of course also a negative for the market and it’s indicating that among institutional investors there’s a negative sentiment. Retail buying isn’t enough to compensate.”
Gold for immediate delivery fell as much as 1.2 percent to $1,408.53 an ounce, the lowest since April 23, and was at $1,410.68 by 9:36 a.m. in London. A fifth straight drop would be the worst run since Feb. 20. Bullion for June delivery was down 1.1 percent at $1,409.20 on the Comex in New York. Futures trading volume was 33 percent above the average in the past 100 days for this time of day, according to data compiled by Bloomberg.
ETP Sales
“The dollar’s strength poses a risk to commodities,” said Feng Liang, an analyst at GF Futures Co. in Guangzhou, a unit of China’s third-biggest listed brokerage. “Sentiment in the gold market is hurt by continued ETF liquidation.”
Gold ETP holdings are down 16 percent in 2013 after gaining every year since the first product was launched in 2003. While the sell-off has been faster than expected, a further drop in ETP holdings will probably mean more price declines, Goldman Sachs Group Inc. analysts including Jeffrey Currie wrote in a report dated yesterday.
Silver for immediate delivery dropped 2 percent to $22.9475 an ounce in London. Palladium slipped 1 percent to $723.95 an ounce. Platinum lost 0.3 percent to $1,496.25 an ounce.
Labor strikes and rising production costs are helping cause shortages of platinum and palladium. Lonmin Plc (LMI), the world’s third-largest platinum provider, said employees did not report for the early shift at its Marikana mine in South Africa after refusing to go underground yesterday following the killing of a union official.
To contact the reporters for this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Glenys Sim at gsim4@bloomberg.net
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net
