Gold May Decline as Some Investors Sell Following Rally to Two-Week High

Gold, little changed in New York today, may fall for a third day as some investors sell the metal to lock in gains after a rally.

Gold is heading for a weekly loss of 0.7 percent, after climbing to a two-week high this week on increased investor demand for an alternative to the euro. The single European currency fell to a four-year low against the dollar today. Holdings of bullion in the world’s biggest exchange-traded fund climbed to a record.

“Gold was pretty much on a one-way street, and it is only natural that we see a bit of a correction,” said Afshin Nabavi, a senior vice president at bullion refiner MKS Finance SA in Geneva. “In the medium to long term, this may be an opportunity to buy into dips.”

Gold futures for August delivery lost as much as $11.50, or 1 percent, to $1,198.50 an ounce, the lowest price since May 25, and traded at $1,207 by 8:05 a.m. on the Comex in New York. Bullion for immediate delivery in London was 0.1 percent lower at $1,205.88.

The metal fell to $1,203.50 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,215 at yesterday’s afternoon fixing. Spot prices are up 9.9 percent this year. The euro slid as much 1 percent against the dollar today, erasing an earlier gain.

‘Lack of Conviction’

“Gold feels jaded for now,” Edel Tully, an analyst at UBS AG in London, said today in a report. “There’s a general lack of conviction as investors appear to be struggling to make up their minds about risk appetite.”

Gold futures are up 3.2 percent in the past month as the euro slumped 7 percent on concern the European fiscal crisis that started in Greece will spread and hamper global growth, driving demand for haven assets. Gold reached a record $1,249.70 on May 14 in New York. Fourteen of 20 traders, investors and analysts surveyed by Bloomberg said bullion would rise next week. Four forecast lower prices and two were neutral.

“Gold at $1,300 an ounce could be a possibility this year if there’s no change to the economic situation,” Nabavi of MKS finance said.

Gold sales to Europe from the Perth Mint in Western Australia surged in May as the Greek sovereign-debt crisis triggered a flight to haven investments, draining stockpiles at the producer of 6 percent of the world’s bullion. European buyers accounted for 69 percent of gold-coin purchases last month, compared with 51 percent a year ago, said Ron Currie, sales and marketing director.

SPDR Holdings

“The market knows the Europe debt crisis isn’t going away anytime soon, so gold’s safe-haven status is going to keep prices supported,” Wu Zheng, an analyst at Soochow Futures Co., said from Shanghai. “After the very quick ascent to nearly $1,250, and without signs of the situation in Europe worsening, gold will probably consolidate around current levels.”

Holdings in the SPDR Gold Trust, the biggest ETF backed by bullion, rose 21.3 metric tons to a record 1,289.84 tons yesterday, according to data on the company’s website. The fund’s assets have increased 14 percent this year. Global holdings gained 21.7 tons to 2,008.1 tons yesterday, according to Bloomberg data tracking 10 providers.

Platinum for July delivery in New York lost 0.8 percent to $1,530.30 an ounce. Palladium for September delivery declined 1.8 percent to $442.80 an ounce. Silver for July delivery was 0.7 percent lower at $18.8575 an ounce.

To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net.

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