Thread: Gold Heads for Fifth Monthly Drop as Investor Holdings Plummet

Gold Heads for Fifth Monthly Drop as Investor Holdings Plummet

By Glenys Sim - Feb 26, 2013 9:23 PM PT

Gold headed for the worst run of monthly losses since 1997 as a 3.2 percent rally in four days spurred sales and investor holdings extended their decline on concern that the metal’s 12-year bull run was coming to an end.

Spot gold fell 0.1 percent to $1,611.55 an ounce at 1:17 p.m. in Singapore, heading for the fifth straight losing month. The metal reached $1,620.37 yesterday, the highest price since Feb. 15, after Federal Reserve Chairman Ben S. Bernanke defended the central bank’s asset purchases. Holdings in exchange-traded products have slumped to a five-month low and are set for the biggest monthly drop since April 2008.

Bullion advanced in the past four days, even as the dollar climbed 1 percent against a basket of six currencies, on signs of increased demand in China and as political turmoil in Italyafter an election spurred renewed haven demand. Volumes on the Shanghai Gold Exchange have jumped, while gold priced in euros rose to a two-week high.

“Some risk-aversion buying may have emerged after Bernanke’s comments and the Italian elections, however, physical buying slows above $1,600 and that’s putting some pressure on the market today,” said Wang Xiaoli, chief investment strategist at CITICS Futures Co., a unit of China’s biggest listed brokerage. “Given the positioning in exchange-traded funds, we remain cautious in the near term.”

Gold holdings in ETPs, which stood at 2,529.994 metric tons yesterday, have shrunk 3.15 percent this month, the biggest fall in almost five years, according to data compiled by Bloomberg. The cycle for gold prices has probably turned as the U.S. recovery gathers momentum and investment holdings drop, Goldman Sachs Group Inc. said in a Feb. 25 report.

Gold, Fed

Gold, which climbed for 12 years, has declined 3.8 percent in 2013 as economic data improved around the world and some U.S. central bankers sought more flexibility in the stimulus program, curbing haven demand. The Fed’s unprecedented rounds of asset purchases are supporting the expansion with little risk of inflation or asset-price bubbles, Bernanke said yesterday in the first of two days of testimony to U.S. lawmakers.

Gold for April delivery dropped 0.3 percent to $1,610.70 an ounce on the Comex in New York after rallying as much as 2.1 percent to $1,619.70 yesterday following Bernanke’s remarks.

Cash bullion of 99.99 percent purity on the Shanghai Gold Exchange climbed 0.8 percent to 326.69 yuan a gram ($1,631.33 an ounce). Daily volumes for the benchmark cash contract have been more than double the average in 2012 since Feb. 18, when it reached a record 22,024 kilograms, according to exchange data.

Cash silver fell 0.6 percent to $29.23 an ounce, set for a monthly decline. Spot platinum slid 0.2 percent to $1,619.37 an ounce, and palladium dropped 0.2 percent to $744.50 an ounce.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

http://www.bloomberg.com/news/2013-02-27/gold-heads-for-fifth-monthly-drop-as-investor-holdings-plummet.html

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