Gold Drops From Two-Week High as Rally Seen Eroding China Demand

Jan 05, 2014 7:55 pm ET

Jan. 6 (Bloomberg) -- Gold fell from the highest level in more than two weeks, paring a rebound from the worst annual drop since 1981, on speculation that rising prices will curb demand in Asia, the world’s largest consuming region.

Bullion for immediate delivery lost as much as 0.3 percent to $1,233.15 an ounce, and traded at $1,235.45 at 8:53 a.m. in Singapore. Prices, which touched a six-month low of $1,182.27 on Dec. 31, earlier climbed 0.4 percent to $1,242, the highest level since Dec. 18.

The metal rose 2 percent last week, the most since October, on signs of increased demand in China. The premium for immediate delivery in the country was about $15.43 an ounce today, down from $29.63 on Dec. 30, when volumes for the benchmark contract on the Shanghai Gold Exchange touched a one-week high of 13,144 kilograms. Volume was 10,846 kilograms on Jan. 3.

“Gold has risen $50 from its recent low and we may see price-sensitive buyers retreat,” said Wang Xiaoli, the chief investment strategist at CITICS Futures Co., a unit of China’s biggest listed brokerage.

Data today may show U.S. services and factory orders climbed, supporting the Federal Reserve’s Dec. 18 decision to reduce its monthly bond buying to $75 billion from $85 billion this month. Bullion slumped 28 percent last year, the most since 1981, in part because central banks’ money-printing failed to stoke inflation and the global economy strengthened.

Futures for February delivery fell 0.3 percent to $1,234.80 on the Comex in New York in trading that was 13 percent above the average for the past 100 days for this time, data compiled by Bloomberg showed. Fifteen analysts surveyed by Bloomberg News expect gold to rise this week, two are bearish and four neutral, the highest proportion of bulls since December 2012.

Silver declined 0.2 percent to $20.1102 an ounce, platinum fell 1.1 percent to $1,397 an ounce, while palladium advanced 0.6 percent to $731.10 an ounce.

--Editors: Jake Lloyd-Smith, James Poole