Gold leading precious rout

February 17, 2015 12:35 PM

Gold futures fell to a six-week low approaching $1,200 an ounce on speculation that Chinese demand will fall during the Lunar New Year holiday. Silver tumbled, and platinum dropped to the cheapest in more than five years.

Volume in the Shanghai Gold Exchange’s benchmark spot contract dropped to the lowest in a year. Markets in China, the world’s second-biggest buyer, will be closed for five sessions starting Wednesday. Investors assessed the risks from a breakdown in talks between Greece and its creditors as U.S. equities traded close to a record high.

“At the moment, the market is discounting the bad news out of Greece as it still expects some kind of last minute solution,” Tai Wong, the director of commodity products trading at BMO Capital Markets Corp. in New York, said in a telephone interview. “Also, China’s gold demand has been very lackluster.”

Gold futures for April delivery fell 1.7% to $1,206.40 at 11:14 a.m. on the Comex in New York. Earlier, the price touched $1,203.30, the lowest for a most-active contract since Jan. 6. Floor trading was closed on Monday for the U.S. Presidents’ Day holiday.

Silver futures for March delivery plunged 5.5% to $16.34 an ounce. The price touched $16.265, the lowest since Jan. 9. Aggregate trading more than doubled compared with the 100-day average for this time, according to data compiled by Bloomberg.

Greek Tumult

In Brussels, Greek Finance Minister Yanis Varoufakis refused to meet demands that his country request an extension of its existing bailout program.

Through Feb. 13, gold rose 3.6% this year on demand for a haven amid slowing global economic growth and turmoil in Greece.

The metal declined in the past three past weeks after an improving U.S. economy backed the case for higher interest rates. The Federal Reserve will release minutes of its January meeting on Wednesday.

Gold climbed 70% from December 2008 to June 2011 as central banks increased money supply on an unprecedented scale, spurring concerns that inflation would accelerate.

In 2014, the metal posted a consecutive annual decline for the first time since 1998 amid a surge in equities and muted inflation. India is the top gold consumer.

On the New York Mercantile Exchange, platinum futures for April delivery slumped 2.7% to $1,175.40 an ounce. Earlier, the price touched $1,168.30, the lowest since July 30, 2009.

Palladium futures for March delivery fell 1.3% to $784.05 an ounce.

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