Gold Falls Most This Month on Declining Investor Demand
San Francisco (Aug 15) Gold fell the most this month on signs of waning investor demand from the U.S. to China. The metal pared losses amid rising tensions in Ukraine.
Violent conflicts in the Middle East and Eastern Europe helped boost prices 9.4 percent this year through yesterday. Investors haven’t been enticed by the gains, sending open interest in New York futures and options to the lowest since 2009 and money managers have trimmed their bullish wagers. Demand for the precious metal fell 16 percent in the second quarter, led by declines in India and China, the World Gold Council said this week.
The 2014 bullion rally defied bearish forecasts from Goldman Sachs Group Inc. and beat gains for broad measures of equities, bonds and commodities. Holdings in the SPDR Gold Trust, the biggest exchange-traded product backed by the metal, are headed for second straight weekly loss. Billionaire hedge fund manager John Paulson has kept his holding in the fund unchanged for four straight quarters.
“While gold has been reacting to the headlines, not many people are convinced that the gains will stick,” James Cordier, the founder of Optionsellers.com in Tampa, Florida, said in a telephone interview. “We have seen muted interest.”
Gold futures for delivery in December fell 0.7 percent to $1,306 an ounce at 11:44 a.m. on the Comex in New York, heading for the biggest drop since July 31. Trading was 46 percent above the 100-day average for this time, data compiled by Bloomberg show.
Prices, which earlier dropped as much as 1.7 percent, pared losses after Ukraine said its troops attacked and partially destroyed an armed convoy that had crossed the border from Russian territory.
The metal will slide to $1,050 in 12 months, Goldman reiterated in a July 23 report, unchanged from its outlook at the start of the year. The bank cited accelerating U.S. economic growth. Bullion tumbled 28 percent last year, the biggest drop in three decades, as the Federal Reserve moved toward ending monetary stimulus. Wholesale prices in the U.S. rose at a slower pace in July, the Labor Department said today.
“Today’s number shows that concerns about inflation were unfounded,” Cordier said. “The Fed’s decision on interest rates and economic growth in the country will be the long-term drivers of gold.”