Gold trades below one-month high as Europe data curb demand

Gold is down 20% this year

Gold traded below a one-month high in London, after a four-day rally, as stronger manufacturing in Europe curbed demand for the metal as a protection of wealth.

The Bloomberg Dollar Index, a measure against 10 major currencies, was little changed near a one-month low after a report showed manufacturing in the 17-nation currency bloc unexpectedly expanded in July. Global equities traded near a two-month high.

Gold slid 20 percent this year, set for the first annual drop in 13 years and wiping $56.8 billion from the value of gold exchange-traded product holdings, after some investors lost faith in the metal as a store of value. It rose 8.7 percent in July, set for the best month since January 2012, after Federal Reserve Chairman Ben S. Bernanke said it’s too early to decide whether to begin scaling back bond purchases in September.

“The firmer European PMI data is lifting stocks and pressuring safe havens” such as gold, Peter Fertig, the owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said today by phone. “The dollar has been weaker and that’s provided uplift for gold. Sentiment is still not positive among institutional investors, as you can see from the ETF holdings.”

Gold for immediate delivery lost 0.2 percent to $1,341.94 an ounce by 9:44 a.m. in London. Prices reached $1,348.65, the highest since June 20. Bullion for December delivery added 0.5 percent to $1,341.90 on the Comex in New York. Futures trading volume was 6.5 percent below than the average for the past 100 days for this time of day, data compiled by Bloomberg showed.

ETP Holdings

Gold ETP holdings fell 2.8 metric tons to 1,971.7 tons yesterday, the lowest since May 2010, data compiled by Bloomberg show. The Fed currently buys $85 billion of debt each month.

“After the recent rally, bullion may consolidate in the near term,” said Mark To, head of research at Wing Fung Financial Group, a Hong Kong-based precious metals trader and refiner. “Gold has been pressured by the expectation of a slowdown in the pace of asset purchases by the Fed. Any sign of weakness in the U.S. economy will help gold.”

Silver for immediate delivery fell 0.7 percent to $20.3527 an ounce in London. Palladium lost 0.3 percent to $738.03 an ounce. Platinum was 0.3 percent lower at $1,444.49 an ounce.

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