Gold Futures Decline as Equities Advance on U.S. Employment Data

Jun 06, 2014 2:44 pm ET

June 6 (Bloomberg) -- Gold futures fell from a one-week high as equities advanced, diminishing demand for the precious metal as an alternative investment.

The Standard & Poor’s 500 Index of shares rose to a record after a government report showed that American employers in May pushed payrolls past their pre-recession peak. Gold rose to the highest since May 30 following the jobs report and dropped as much as 0.6 percent after the U.S. equity market opened.

The 60-day historical volatility for the metal this week reached the lowest since April 2013, and the value of exchange- traded products backed by the commodity shrank by $2.6 billion in May, the most this year. Gold’s appeal as a haven diminished as U.S. equities surged and tension between Ukraine and Russia eased. More than $1.1 trillion was added to the value of global stock markets last month.

After the payrolls report, “we saw a very delayed reaction in gold, and it was equities that put pressure on,” Mike Dragosits, a senior commodity strategist at TD Securities in Toronto, said in a telephone interview. “Prices will remain range-bound as there is no big catalyst to push it one way or another.”

Gold futures for August delivery fell 0.1 percent to settle at $1,252.50 an ounce at 1:41 p.m. on the Comex in New York. Earlier, the price rose as much as 0.4 percent to $1,258.20. On June 3, the metal touched $1,240.20, the lowest since Jan 31.

U.S.employers added 217,000 jobs last month, after a 282,000 gain in April, the Labor Department said. The median forecast in a Bloomberg survey of economists called for a 215,000 gain.

Fed Tapering

Last year, gold tumbled 28 percent on expectations that the Federal Reserve would reduce stimulus as the economy strengthens. The central bank reduced its monthly asset buying to $45 billion in April after the fourth straight $10 billion cut. The metal has dropped 10 percent from a six-month high of $1,392.60 an ounce in March.

Gold climbed 70 percent from December 2008 to June 2011 as the Fed bought debt and held borrowing costs near zero percent.

Holdings in global gold ETPs are close to the lowest since 2009. More than $73 billion was erased from the value of the funds in 2013. Open interest on the Comex, the aggregate number of futures contracts yet to be closed, liquidated or delivered, dropped in April to the lowest since May 2009.

Silver futures for July delivery fell 0.5 percent to $18.991 an ounce on the Comex, ending a four-day rally. This week, the price climbed 1.7 percent, the most since March 14.

In 2014, gold has gained 4.2 percent, and silver dropped 2 percent.