Gold tumbled the most in more than five weeks as physical demand ebbed and a stronger dollar trimmed demand for the precious metal as an alternative investment.
Global bullion holdings in exchange-traded products tumbled 6.9% last quarter, the most since at least 2004. The dollar rose for the first time in four sessions against a basket of six currencies. Cypriot government officials will seek easier bailout terms in talks with the European Union and the International Monetary Fund today.
Gold is in a “bubble” and will head into a so-called bear market as improving U.S. economic growth prompts the Federal Reserve to curb stimulus efforts, Societe Generale SA analysts including London-based Robin Bhar said in a report today. The U.S. Mint’s sales of American Eagle gold coins slumped 23% in March from a month earlier to 62,000 ounces.
“Lower physical demand and dollar strength are working against gold,” Bill O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said in a telephone interview. “The safe-haven premium is not high as Europe is not falling apart even though slowdown concerns remain.”
In New York, gold futures for June delivery fell 1.6% to settle at $1,575.90 an ounce at 1:35 p.m. on the Comex, the biggest decline since Feb. 20.
Prices have fallen 6% this year, after 12 straight annual gains, as a rally in equities and stronger economic growth cut demand for the precious metal as a haven.
“There’s not much physical interest anywhere,” Bernard Sin, head of currency and metal trading at bullion refiner MKS (Switzerland) SA in Geneva, said today in a telephone interview.
Silver futures for May delivery retreated 2.5% to $27.248 an ounce in New York, after reaching $27.15, the lowest since Aug. 3. The metal closed at $27.944 yesterday, a 20% drop from an Oct. 4 high, meeting the common definition of a bear market. Trading was 37% higher than the 100-day average for this time of day, data compiled by Bloomberg show.
On the New York Mercantile Exchange, platinum futures for July delivery dropped 1.5% to $1,574.20 an ounce, the biggest drop since Feb. 21.
Palladium futures for June delivery retreated 1.9% to $769.40 an ounce. Trading was 39% below the 100-day average for this time of day.