Gold Holds Decline From Three-Month High on U.S. Rates Outlook

Jul 08, 2014 2:19 am ET

July 8 (Bloomberg) -- Gold held a retreat from a three- month high as investors assessed the timing of U.S. interest- rate increases. Palladium declined from the highest price since 2001 to snap the longest rally in 10 months.

Bullion for immediate delivery fell as much as 0.2 percent to $1,316.80 an ounce and was at $1,318.55 at 2:11 p.m. in Singapore, according to Bloomberg generic pricing. The metal, which rose to $1,332.33 on July 1, the highest price since March 24, dropped as much as 0.7 percent to $1,311.64 yesterday.

Gold halted a 12-year bull run last year on speculation that the Federal Reserve would scale back stimulus used to fuel economic growth. The Fed, which has kept its benchmark lending rate near zero percent since December 2008, on July 9 will release minutes of its June 17-18 meeting, when it reduced monthly asset purchases for a fifth time.

“Market expectations for an early rate hike is pressuring the gold price,” Sarah Xie, a Hong Kong-based analyst at Wing Fung Financial Group Ltd., wrote in a note. “Gold is expected to remain flat until investors get more guidance from the Fed regarding the timing of rate increases.”

The outlook for rising U.S. interest rates and low inflation expectations should see the gold declining on an average basis for the next five quarters, Joel Crane, a Morgan Stanley analyst, wrote in a quarterly report today. The bank forecasts prices to average $1,264 this year and $1,180 in 2015.

Gold Positions

Gold for August delivery added 0.2 percent to $1,319.20 an ounce on the Comex in New York. The net-long position in gold rose 20 percent to 136,929 futures and options contracts in the week to July 1, according to U.S. Commodity Futures Trading Commission data published last week. That’s the highest since March 18 and up fourfold since the start of the year.

Holdings in the SPDR Gold Trust, the largest bullion-backed exchange-traded product, rose 0.2 percent to 798.19 metric tons yesterday, the highest level since April 16.

Palladium for immediate delivery decreased 0.1 percent to $867.80 an ounce, after the metal climbed yesterday for an 11th day to $869.15, the highest price since February 2001.

Spot silver declined 0.1 percent to $21.0265 an ounce, while platinum was little changed at $1,493.50 an ounce.

Impala Platinum Holdings Ltd., the second-largest producer, says it expects workers who walked out last week at its Marula mine to report for duty today. The strike followed a five-month stoppage that crippled output at the biggest producers in South Africa.

--With assistance from Phoebe Sedgman in Melbourne.