Gold takes hit as equities soar

May 30, 2014 06:47 AM

Gold futures(COMEX:GGCN14) fell, heading for the biggest weekly drop in eight months, after a U.S. equity rally and signs of easing tensions in Ukraine curbed demand for the precious metal as a haven.

U.S. durable-goods orders unexpectedly rose in April, indicating manufacturing is gaining, government data showed on May 27. Today, the Standard & Poor’s 500 Index of stocks climbed to a record before paring gains. Last year, gold tumbled 28 percent on concern that the Federal Reserve would taper the pace of monetary stimulus as the economy rebounded.

Russia has pulled back most of its troops from the border with Ukraine, according to a U.S. defense official. Gold dropped below $1,250 an ounce to a 16-week low and headed for the fifth straight daily decline, the longest slump since April 1.

“The safe-have premium is waning as people are gradually shrugging off worries about a slowdown in the U.S.,” Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said in a telephone interview. “Money continues to flow into equities.”

Gold futures for August delivery fell 0.8 percent to $1,246.50 an ounce at 10:58 a.m. on the Comex in New York. Earlier, the price touched $1,244.50, the lowest for a most- active contract since Feb. 3. This week, the metal has dropped 3.5, the most since Sept. 13.

On May 22, assets in global exchange-traded funds backed by gold fell to 1,715.8 metric tons, the lowest since Oct. 2, 2009, according to data compiled by Bloomberg.

‘Transferring Capital’

“Risk appetite has been improving,” Sarah Xie, an analyst at Hong Kong-based Wing Fung Financial Group Ltd., said in a telephone interview. “Investors are transferring their capital from gold to the stock market. Turmoil in Ukraine has eased.”

Silver futures for July delivery fell 1 percent to $18.82 an ounce on the Comex. The price headed for the fifth straight drop, the longest slump since late March.

On the New York Mercantile Exchange, palladium futures for September delivery dropped 0.4 percent to $831.35 an ounce. The price headed for the fourth straight monthly increase, the longest rally since January 2011.

Platinum futures for July delivery fell 0.4 percent to $1,454.10 an ounce. The price headed for the sixth gain in seven months.

In May, ETPs backed by the metals rose to records, according to Bloomberg data. An 18-week strike by workers in South Africa at the three largest platinum companies has crippled output.

The nation is the world’s top platinum producer and the second-biggest source of palladium. Labor talks being brokered by the government will continue today.

Russia is the largest palladium supplier.

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