Gold Snaps Four-Day Advance as Rally Hurts Demand

LONDON (Aug 13)   Gold traded below the highest price in almost three weeks in London on speculation some investors may sell the metal after prices rallied on stronger physical demand. Silver advanced to the highest since June.

Bullion climbed 4.3 percent in the four days through yesterday. The Bloomberg U.S. Dollar Index, a measure against 10 major currencies, rose for a second day before a report that may show U.S. retail sales climbed for a fourth month, strengthening the case for the Federal Reserve to scale back stimulus.

Gold fell into a bear market in April and is down 20 percent this year as some investors lost faith in the metal as a store of value and inflation failed to accelerate amid unprecedented money printing by central banks. Bullion rebounded 13 percent from a 34-month low set June 28 as lower prices spurred demand. Consumption in China, last year’s second-largest consumer, after India, increased 54 percent in the first half of 2013, an industry group said yesterday.

“We may well see a bit of profit taking,” David Govett, head of precious metals at Marex Spectron Group in London, said today in an e-mail. “I would look to buy dips to the low $1,300s if we do. Things feel more constructive at the moment. Good gold consumption figures out of China underpinned the market.”

Gold Price

Gold for immediate delivery lost 0.2 percent to $1,335.73 an ounce by 10:11 a.m. in London. It reached $1,344.40 yesterday, the highest since July 24. Bullion for December delivery was up 0.1 percent at $1,335.40 on the Comex in New York. Futures trading volume was 14 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg showed.

“The market is consolidating after recent gains, with a stronger dollar weighing on prices,” said Sun Yonggang, a macroeconomic strategist at Everbright Futures Co., a unit of one of China’s largest state-owned investment companies. “Higher prices may deter fresh investment and physical purchases.”

Silver for immediate delivery rose 1.2 percent to $21.6573 an ounce in London, climbing for a fifth day in the best run since January. Prices reached $21.777, the highest since June 19, after jumping 4.2 percent yesterday. An ounce of gold bought 61.5 ounces of silver in London today, and the ratio should drop toward about 50 in the next couple of years, UBS AG estimates.

“While pressure on gold on the back of Fed-tapering expectations is likely to also weigh heavily on silver, ultimately the white metal should benefit from a pick-up in economic activity,” Joni Teves, an analyst at UBS in London, wrote in a report today. “A recovery in industrial demand would be a catalyst for silver to rebuild the investor base that had been damaged by silver’s violent price moves in recent years.”

Palladium rose 0.5 percent to $740.80 an ounce. Platinum was up 1 percent at $1,510.08, after rising as much as 1.2 percent to $1,513.24, the highest since June 7.