Gold Drops From 3 Month High as Buying Seen Deterred After Rally

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gsr-23145Gold retreated from the highest price in more than three months inLondon on speculation the metal’s advance may deter physical purchases. Silver fell, ending the longest run of gains since at least 1968.

Bullion rose 9.4 percent this year, rebounding from the biggest annual drop since 1981, as reports showed that the U.S. economy wasn’t growing as fast as forecast and as lower prices spurred demand, particularly in China. The U.S. Mint sold 13,000 ounces of American Eagle gold coins so far in February, compared with 91,500 ounces for all of January, mint data show.

“The strength is not going to last,” said Dominic Schnider, head of commodities research at UBS AG’s wealth-management unit in Singapore, citing prospects for less U.S. stimulus, a stronger dollar and restrained inflation. Consumers in China may “pull back a little bit from gold purchases” amid higher prices, he said.

Bullion for immediate delivery fell 0.7 percent to $1,319.42 an ounce by 9:10 a.m. in London. It reached $1,332.45 earlier today, the highest since Oct. 31. Gold for April delivery was little changed at $1,319.30 on the Comex in New York, where futures trading volume was triple the average for the past 100 days for this time of day, data compiled by Bloomberg showed.

U.S. markets were closed yesterday for a holiday and transactions will be booked today for settlement purposes.

Goldman’s View

Goldman Sachs Group Inc. said in a report last week that the metal will “grind lower” as U.S. growth improves. The Federal Reserve will release minutes of its January meeting tomorrow.

The central bank said in December that it would start paring stimulus by cutting its monthly bond purchases by $10 billion per month, and it decided on another reduction of the same size last month, to $65 billion. U.S. reports on housing starts and consumer prices are due this week.

“We expect volatility in gold to pick up later this week” as U.S. data is released, Abhishek Chinchalkar, an analyst at Mumbai-based AnandRathi Commodities Ltd., said in a report. “With the metal having rallied sharply over the past week, any positive surprise on the data front could trigger a decent bout of profit taking and potentially drag prices south.”

Silver for immediate delivery slipped 0.4 percent to $21.6151 an ounce. It reached $21.9791 yesterday, the highest since Nov. 7, as it gained for a 12th successive day in the longest run since at least 1968.

Palladium fell 0.7 percent to $736 an ounce, after climbing to a three-week high of $743.34 yesterday. It had gained for nine consecutive days in the longest streak since September 2012. Platinum declined 0.6 percent to $1,422.44 an ounce, after reaching a three-week high of $1,434.56 yesterday.

More than 70,000 Association of Mineworkers and Construction Union members have been on strike since Jan. 23 at Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin Plc mines in South Africa. The country is the biggest platinum producer.