Gold Trades Near 6-Week Low for Monthly Drop on Stimulus Outlook

London ( Mar 31) Gold traded near a six-week low in London, set for the first monthly decline this year, as signs of a U.S. recovery backed the case for the Federal Reserve to continue reducing stimulus.

Gold slipped 2.4 percent this month after U.S economic data including durable goods orders beat estimates, while Fed Chair Janet Yellen has said that the central bank’s debt-buying program may end this year with interest rates starting to rise in 2015. U.S. figures due tomorrow may show manufacturing strengthened this month.

The metal rose 70 percent from December 2008 to June 2011 as the Fed pumped more than $2 trillion into the financial system and cut interest rates to boost the economy. Gold still gained 7.7 percent this year, reaching a six-month high on March 17, as Russia’s annexation of Crimea spurred demand for a haven.

“With geopolitical tensions not escalating further, with U.S. economic data starting to come in good, and with expectations of a continuing tapering by the Fed resurfacing, people now seem to have started reducing their bullish exposure in the yellow metal,” Abhishek Chinchalkar, an analyst at Mumbai-based AnandRathi Commodities Ltd., said in a report.

Bullion for immediate delivery was little changed at $1,294.10 an ounce by 9:30 a.m. in London, according to Bloomberg generic pricing. It reached $1,285.82 on March 28, the lowest since Feb. 12. Gold for June delivery was little changed at $1,294.40 on the Comex in New York, where futures trading volume was about the average for the past 100 days for this time of day, data compiled by Bloomberg showed.


ETP Holdings

Gold rebounded since the end of December after dropping last year by the most since 1981. Holdings in bullion-backed exchange-traded products gained 19.8 metric tons this month, set for the first back-to-back monthly expansion since December 2012, data compiled by Bloomberg show. Assets fell to 1,735.4 tons in February, the lowest since October 2009.

The Fed cut monthly asset purchases by $10 billion at the last three meetings and next meets on April 29-30. Yellen is scheduled to deliver remarks at a conference in Chicago today.

“Yellen alluded to a rate hike which has pressured gold lower, but investors should remember that while data is improving, the U.S. economy is still far from strong,” Sun Yonggang, a macroeconomic strategist at Everbright Futures Co., said from Shanghai. “While tension between Russia and Ukraine still exists, it isn’t rising for now and that’s also hurt sentiment toward gold.”

Silver Prices

Silver for immediate delivery gained 0.3 percent to $19.9062 an ounce in London. The metal fell 6.3 percent in March, cutting its increase this year to 2.2 percent. Platinum rose 1.1 percent to $1,424.50 an ounce. It declined 1.5 percent this month, the first such loss since November. Palladium added 0.2 percent to $776.10 an ounce. Prices climbed to $801.53 on March 24, the highest since August 2011.

The metal climbed 4.5 percent this month on concern that more sanctions by the U.S. and the European Union against Russia and a strike at South African mines will reduce supplies. The countries are the largest suppliers of palladium.

U.S. Secretary of State John Kerry said Russia must pull forces back from Ukraine’s border as both sides seek a diplomatic solution. Stating they are concerned that pro-Kremlin troops massing on Ukraine’s borders may invade the ex-Soviet state, the U.S. and EU have vowed to intensify sanctions on Russia’s military, energy and financial industries.

Source:  Bloomberg