Gold Extends Slump on Economy; Silver Falls to Nine-Month Low

May 01, 2014 2:33 pm ET

May 1 (Bloomberg) -- Gold futures posted the longest slump in a month as signs of a recovery in the U.S. economy curbed demand for the precious metal as an alternative asset. Silver dropped to the lowest since July.

Consumer spending in March jumped by the most since August 2009, government data showed today. Yesterday, the Federal Reserve said it pared monthly bond purchases to $45 billion and said further reductions in “measured steps” are likely. Gold slumped 28 percent in 2013, the most since 1981, partly on concern that the Fed would slow the pace of monetary stimulus.

“Tapering coupled with strong economic data will keep gold under pressure,” Mike Meyer, an assistant vice president at EverBank Wealth Management in St. Louis, said in a telephone interview. “The sentiment is very negative for precious metals.”

Gold futures for for June delivery fell 1 percent to settle at $1,283.40 an ounce at 1:39 p.m. on the Comex in New York. The price declined for a fourth straight day, the longest slump since April 1.

Silver futures for July delivery declined 0.7 percent to $19.043 an ounce. Earlier, the metal touched $18.685, the lowest for a most-active contract since July 8.

This year gold has risen 6.7 percent this year, partly as concern that the U.S. economy was stalling boosted haven appeal.

Household Spending

“Growth in economic activity has picked up recently, after having slowed sharply,” the Federal Open Market Committee said yesterday. “Household spending appears to be rising more quickly.”

Gold jumped 70 percent from December 2008 to June 2011 as the Fed bought debt and cut interest rates to a record in a bid to boost the economy.

Yesterday, holdings in the SPDR Gold Trust, the biggest exchange-traded product backed by the metal, fell 0.5 percent to 787.94 metric tons, the lowest since January 2009.

On the New York Mercantile Exchange, palladium futures for June delivery rose 0.2 percent to $814.15 an ounce. Earlier, the price reached $819.30, the highest since Aug. 3, 2011.

Palladium ETPs jumped 22 percent in April to a record 80.3 metric tons, according to data compiled by Bloomberg, after two funds started in South Africa, the world’s second-biggest producer.

Platinum futures for July delivery fell less than 0.1 percent to $1,427.50 an ounce.

This year, palladium has climbed 13 percent, and platinum has gained 3.9 percent, amid strikes by miners in South Africa.

--With assistance from Phoebe Sedgman in Melbourne.