Gold Falls From Six-Month High as Equities Gain on Factory Data
March 17, 2014 (Source: Bloomberg) — Gold declined from a six-month after U.S. industrial production increased more than expected, curbing demand for the metal as an alternative investment.
The Standard & Poor’s 500 Index of equities rallied 1 percent after Federal Reserve data showed factory output rose the most last month since August, topping the highest estimate in a Bloomberg survey of economists. The Fed, which said it will curb stimulus as the economy improves, starts a two-day meeting tomorrow. Gold surged earlier after a referendum paved the way for Russia to annex Crimea, fueling tensions in the region.
“The strength in the U.S. data is taking some sheen off gold, and the Fed meeting is back in focus,”David Meger, the director of metal trading at Vision Financial Markets in Chicago, said in a telephone interview. “Any signs of unrest or violence in Crimea and economic sanctions against Russia will bring people back to gold.”
Gold futures for April delivery fell 0.4 percent to settle at $1,372.90 an ounce at 1:42 p.m. on the Comex in New York. The precious metal earlier rose to $1,392.60, the highest for a most-active contract since Sept. 9.
European Union foreign ministers agreed today to freeze assets and impose visa travel bans on 21 Russians and Crimeans.
About 97 percent of voters in Crimea chose to leave Ukraine and become part of Russia in a referendum deemed illegal by the U.S. and the European Union.
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Gold has advanced 14 percent this year as turmoil in Ukraine and slowing growth in the U.S. andChina, the largest user, increased demand for protection of wealth. The net-long position in the metal rose 4 percent to 123,007 futures and options in the week ended March 11, the highest since December 2012, U.S. Commodity Futures Trading Commission data show. Short holdings fell 20 percent to 21,073, the lowest since October.
Last week, exchange-traded products backed by gold climbed 0.7 percent, the third straight gain, data compiled by Bloomberg show. In 2013, the holdings plunged 33 percent, the first decline since the securities debuted in 2003.
Gold futures slumped 28 percent last year as equities rallied to a record and inflation remained muted. The Fed announced a $10 billion reduction in bond buying at each of its past two meetings, leaving monthly purchases at $65 billion.
Prices surged 70 percent from December 2008 to June 2011 as the Fed pumped more than $2 trillion into the financial system and lowered interest rates to a record to boost the economy.
Silver futures for May delivery fell 0.6 percent to $21.275 an ounce.
On the New York Mercantile Exchange, platinum futures for April delivery lost 0.1 percent to $1,468.40 an ounce.
Palladium futures for June delivery gained 0.4 percent to $776.40 an ounce. Russia is the world’s biggest source of the metal.
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