BLBG:Gold Drops With Silver as Dollar Strengthens Before U.S. Data
Gold declined in London as a stronger dollar curbed demand for an alternative investment and amid speculation the U.S. economy is strengthening. Silver dropped.
The dollar gained as much as 0.4 percent against six major currencies before U.S. data today that economists say will show consumer confidence improved and home prices gained. Central banks including Russia and Kazakhstan added gold to reserves in April, International Monetary Fund data showed. Bullion holdings in exchange-traded products are set for a fifth monthly drop.
“The two-pronged influence of ETF selling and a stronger U.S. currency is the largest headwind facing any recovery in price,” analysts at Morgan Stanley wrote today in a report. “Should either of these trends ease, physical demand via jewelry sales and central bank buying could provide key support.”
Gold for immediate delivery fell 1 percent to $1,380.60 an ounce by 9:45 a.m. in London. Prices rose 0.6 percent yesterday, extending last week’s 2 percent gain that was the most in a month. Bullion for August delivery was 0.6 percent lower at $1,379.80 on the Comex in New York. Futures trading volume was more than double the average in the past 100 days for this time of day, according to data compiled by Bloomberg.
Dollar Rallies
Gold has slumped 18 percent this year, while the dollar rallied 5.2 percent against a six-currency basket on speculation the Federal Reserve may scale back quantitative-easing measures that helped bullion cap a 12-year bull run in 2012. Raising interest rates or curbing bond buying too soon would endanger the recovery, Fed Chairman Ben S. Bernanke said last week. He also said the pace of bond purchases could be reduced in the next few meetings if the jobless rate keeps dropping.
“As prospects for the U.S. economy remain positive, expectations are for a withdrawal of QE, supporting the dollar and weighing on gold,” said Feng Liang, an analyst at GF Futures Co. in Guangzhou, a unit of China’s third-biggest listed brokerage. “The initial wave of physical demand after the big price drop has eased and purchases tend to slow down as the price approaches $1,400.”
The volume for the Shanghai Gold Exchange’s benchmark cash contract shrank to a two-week low of 10,094 kilograms yesterday. It had risen to a record after gold dropped to a two-year low of $1,321.95 last month. Holdings in exchange-traded products fell to 2,158.4 metric tons on May 24, the lowest since June 2011, according to data compiled by Bloomberg.
Silver Slides
Silver for immediate delivery slid 1.6 percent to $22.309 an ounce in London. Palladium was 0.6 percent lower at $733.58 an ounce. Platinum was little changed at $1,447.38 an ounce. While gold slumped and silver plunged 26 percent this year, platinum lost 6 percent and palladium rose 4.2 percent.
Holdings in platinum-backed ETPs, up 34 percent this year, reached a record 62.5 tons on May 24, according to data compiled by Bloomberg. Assets in palladium products gained 16 percent this year to 66.9 tons. Platinum will end the year at $1,690 and palladium will climb to $800, according to the medians of 15 analyst estimates compiled by Bloomberg earlier this month. Both metals are mainly used in car autocatalysts.
To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net
