Gold Drops to Five-Week Low as U.S. Data Bolsters Taper Outlook

Mar 26, 2014 2:38 pm ET

March 26 (Bloomberg) -- Gold fell to a five-week low in New York as signs of economic recovery in the U.S. boosted speculation the Federal Reserve will further pare stimulus, curbing demand for the precious metal as a store of value.

Orders for durable goods climbed a more-than-forecast 2.2 percent in February, reflecting the biggest gain in automobile demand in a year, a government report showed today. Gold has lost 2.8 percent since March 19, when Fed Chair Janet Yellen said the central bank’s debt-buying program may end this year.

“The durable goods number was stronger than expected, and that’s weighing on the market,” Bill O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said in a telephone interview. “Further ideas that the Fed will move at a quicker pace toward tightening continue to be an overhang factor.”

Gold futures for June delivery slipped 0.6 percent to settle at $1,303.40 an ounce at 1:41 p.m. on the Comex in New York after touching $1,300.80, the lowest for a most-active contract since Feb. 14.

Prices reached a six-month high on March 17 after Crimea’s referendum on seceding from Ukraine, which escalated the standoff between Russia and the U.S. and Europe. The combined net-long positions in gold futures and options in the week ended March 18 climbed 13 percent to the highest since November 2012.

Hedge funds and other speculators have been closing bullish bets to curb losses, O’Neill said.

The drop in prices has taken gold near the 200-day moving average of about $1,299.78. The metal last traded below the measure in mid-February, and a close below that may signal further losses to some traders who study price charts.

Technical Level

“The 200-day moving average is just under $1,300 an ounce, so on a technical basis it’s likely to be supported,” Victor Thianpiriya, an analyst at Australia & New Zealand Banking Group Ltd., said by telephone from Singapore. “Ukraine and Russia was providing a bit of a safe-haven bid.”

Gold rose 70 percent from December 2008 to June 2011 as the Fed pumped more than $2 trillion into the financial system and cut interest rates to boost the economy. Policy makers announced the third $10 billion cut in monthly bond purchases, and gold last week dropped 3.1 percent, the most since November.

Prices may fall for the second straight year as some investors shift to stock and property markets, according to CPM Group. The metal may average $1,332 in 2014, Jeffrey Christian, CPM managing director, said yesterday in an interview. That’s down from the average $1,408.83 in Comex futures in 2013.

Strike Talks

Silver futures for May delivery slid 1 percent to $19.78 an ounce on the Comex, the lowest closing price since Feb. 4.

On the New York Mercantile Exchange, platinum for July delivery fell 1.1 percent to $1,407.50 an ounce. Palladium for June delivery declined 1 percent to $781.15 an ounce. Prices reached $802.45 on March 24, the highest since August 2011.

Russia is the biggest supplier of palladium. South Africa is the next largest, and the top platinum producer.

Workers at the South African operations of Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin Plc, the largest platinum suppliers, are seeking to end a strike that began Jan. 23, the companies said.

--With assistance from Nicholas Larkin in London and Phoebe Sedgman in Melbourne.