Gold Falls for Fourth Time in Five Sessions as Equities Rebound

Aug 04, 2014 3:08 pm ET

Aug. 4 (Bloomberg) -- Gold futures fell for the fourth time in five sessions as a U.S. equity rally reduces demand for the precious metal as an alternative investment.

The Standard & Poor’s 500 Index rose on speculation that the crisis at Portugal’s Espirito Santo SA will be contained. U.S. data showed Aug. 1 that employers added more than 200,000 jobs for the sixth straight month. Last week, gold dropped 0.8 percent, the third straight decline.

“The strength in the equity market is putting pressure on gold,” Frank Lesh, a trader at FuturePath Trading LLC in Chicago, said in a telephone interview. “It’s clear that the U.S. economy is showing strength, even though the pace is slow.”

On the Comex in New York, gold futures for December delivery fell 0.5 percent to settle at $1,288.90 an ounce at 1:40 p.m. Trading was 50 percent below the 100-day average, data compiled by Bloomberg show. On Aug 1, the price touched $1,281, the lowest for a most-active contact since June 19.

Gold fell 3 percent last month on concern that the Federal Reserve would raise interest rates as the economy gained traction.

The central bank “is still exercising restraint as regards any normalization of the interest-rate level in the near future,” analysts at Commerzbank AG said in a report. “Nonetheless, good economic data over the next few months are likely to put the subject of interest-rate hikes back on the Fed’s agenda, which should reduce the relative attractiveness of gold.”

Haven Demand

Gold climbed 10 percent in the first half of 2014 as violence in the Middle East and Ukraine boosted haven demand.

Silver futures for September delivery dropped 0.7 percent to $20.233 an ounce on the Comex. Earlier, the price touched $20.20, the lowest since June 19.

On the New York Mercantile Exchange, platinum futures for October delivery rose 0.2 percent to $1,466.60 an ounce.

Palladium futures for September delivery tumbled 1.1 percent to $855.10 an ounce, the biggest drop for a most-active contract since June 20.

The price has climbed 19 percent this year after a five- month strike by miners cut output in South Africa, the world’s biggest second-biggest producer

Russia is the top source of the metal, used mostly in pollution-control devices in cars.