Gold (COMEX:GCG14) and silver (COMEX:SIH14) tumbled the most in six weeks as signs of faster U.S. economic growth fueled bets that the Federal Reserve will keep cutting stimulus. Palladium capped the longest decline in almost five months.
The annualized gain of 3.2% in the gross domestic product matched the median forecast in a Bloomberg survey, government figures showed. Growth in the second half of the year was the strongest since the six months ended in March 2012. The Fed said yesterday that it will trim monthly bond purchases by $10 billion to $65 billion.
In 2013, gold plunged 28%, the most since 1981. Some investors lost faith in the metal as a store of value aid a U.S. equity rally to a record and muted inflation. This week, a rout in emerging-market currencies spurred demand for the metal as a haven. Today, the dollar rose for the third straight day against a basket of major currencies, eroding the appeal of some commodities as alternative investments.
“Today’s data shows the economy is healing,” Phil Streible, a senior commodity broker at R.J. O’Brien & Associates in Chicago, said in a telephone interview. “The strength in the dollar is also working against gold.”
Gold futures for April delivery fell 1.6% to settle at $1,242.50 an ounce at 1:45 p.m. on the Comex in New York, the biggest drop for a most-active contract since Dec. 19. Trading was 45% higher than the average in the past 100 days for this time, data compiled by Bloomberg show.
Silver futures for March delivery fell 2.2% to $19.126 an ounce, the biggest decline since Dec. 19.
This month, gold has climbed 3.3% as purchases of coins, bars and jewelry jumped after the metal slumped dropped to a six-month low at the end of 2013.
In January, the Standard & Poor’s GSCI Spot Index of 24 raw materials has declined 0.9%. The MSCI All-Country World Index of equities dropped 3.6%. The Bloomberg Dollar Spot Index rose 1.1%, and the Bloomberg Treasury Bond Index gained 1.6%.
Holdings in exchange-traded products backed by gold have slumped 33% in the past year, erasing $71.3 billion from the value of the funds, according to Bloomberg data.
Futures have plunged 35% from a record $1,923.70 in September 2011.
The price may test $1,000 as “the main casualty” of Fed tapering and the dollar’s rally, BNP Paribas said today in a report. “The current notable absence of inflationary pressures will add to gold’s woes.”
The metal rose 70% from December 2008 to June 2011 as the Fed pumped more than $2 trillion into the financial system. The central bank will scale back asset purchases gradually through 2014 to end stimulus by year-end, according to the median of forecasts by economists this month in a Bloomberg survey.
Palladium futures for March delivery dropped 0.6% to $706.85 an ounce on the New York Mercantile Exchange.. The price fell for the sixth straight session, the longest slump since Sept. 5.
Platinum futures for April delivery slumped 1.8% to $1,382.30 an ounce. The price dropped for the fifth straight session, the longest slump since Dec. 17.
A South African strike that has cut output at the world’s three-biggest producers may spread at Anglo American Platinum Ltd. as a second union plans to walk out at refineries and smelters.
The companies have said they built inventories to last as long as eight weeks.