Gold Falls as U.S. Equities Rise to Record on Economic Outlook

Dec 23, 2013 2:01 pm ET

Dec. 23 (Bloomberg) -- Gold futures fell as U.S. equities rose to a record amid signs of an improving U.S. economy, reducing demand for the metal as an alternative investment.

The International Monetary Fund plans to raise its outlook for the U.S. economy. The Standard & Poor’s 500 Index of stocks climbed as much as 0.6 percent. On Dec. 19, gold closed at the lowest in more than three years after the Federal Reserve said it will slow stimulus amid improving job-market prospects.

“The U.S. stock indexes continue on their major bull- market run,” Jim Wyckoff, a senior analyst at Kitco Metals Inc., a research company in Montreal, said in a report. The rally “has been a bearish drag on other investment asset classes, as many traders and investors presently reckon stocks are the only game in town.”

Gold futures for February delivery fell 0.6 percent to settle at $1,197 an ounce at 1:37 p.m. on the Comex in New York. On Dec. 19, the metal closed at $1,193.60, the lowest for a most-active contract since Aug. 3, 2010.

Gold has tumbled 29 percent this year, heading for the first annual annual drop since 2000 and the biggest slump since 1981. The Fed said on Dec. 18 it will cut monthly asset purchases to $75 billion from $85 billion, while pledging to keep interest rates near zero percent.

Money managers increased their short gold positions by 1.2 percent to 75,199 Comex contracts in the week ended Dec. 17, within 6 percent of the record in July, government data showed on Dec. 20.

“Short positions have increased, and gold may have a bounce if investors close them out before the end of the year,” said Mark To, the head of research at Wing Fung Financial Group, a Hong Kong-based trader and refiner. “Below $1,200 is still an attractive entry point for some.”

Silver futures for March delivery fell 0.2 percent to $19.413 an ounce on the Comex. On the New York Mercantile Exchange, platinum futures for April delivery declined 0.4 percent to $1,328.20 an ounce, and palladium futures for March delivery declined 0.4 percent to $695.65 an ounce.

--With assistance from Glenys Sim in Singapore. Editors: Patrick McKiernan, Millie Munshi