Gold May Fall 2nd Day in New York, London as Some Investors Sell on Gains

Gold may decline for a second day in New York as some investors sell the metal to lock in gains from its rally to near a record. Other precious metals fell.

Bullion futures dropped 1.4 percent yesterday after earlier trading within 0.3 percent of an all-time high. European equities declined to the lowest level in more than two weeks today amid concerns that China’s economy is growing at a slower pace than previously estimated.

Gold is “likely to remain vulnerable to further pockets of long liquidation or profit taking in the run-up to month- and quarter-end,” said James Moore, an analyst at TheBullionDesk.com in London. “With Chinese growth concerns surfacing and European Union default fears on the rise, we expect investor dip-buying to provide further background support.”

Gold futures for delivery in August lost $3.30, or 0.3 percent, to $1,235.30 an ounce at 8:17 a.m. on the Comex in New York. Prices are up 11 percent this quarter. Gold for immediate delivery in London was 0.4 percent lower at $1,234.55.

Bullion fell to $1,236 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,261 at yesterday’s afternoon fixing. Gold is up 1.7 percent this month in New York.

The Stoxx Europe 600 Index dropped as much as 2.2 percent after the Conference Board corrected its April gauge for the outlook of China’s economy to indicate slower growth and Citigroup Inc. said the country’s exports face “strong headwinds.” European confidence in the economic outlook unexpectedly improved in June, a report from the European Commission in Brussels showed today.

‘Ultimate Insurance Policy’

Bullion is on course for its biggest quarterly advance since the final three months of 2007, as investors sought to protect their wealth from prolonged financial turbulence in Europe and on concern the global recovery may slow. The metal gained 13 percent this year, reaching a record $1,266.50 an ounce on June 21.

Japan’s unemployment rate unexpectedly rose to 5.2 percent in May and households cut spending, adding to evidence that consumer outlays are too weak to drive the economic recovery. A separate report showed industrial production fell in May as manufacturers accumulated inventories.

“Gold is the ultimate insurance policy in the face of financial market uncertainty and investors continue to receive mixed messages with respect to the broader world economy,” said Gavin Wendt, senior analyst with MineLife Pty Ltd. in Sydney. “Continued strong growth amongst emerging economies is being offset by uncertainty in Europe and the U.S.”

Holdings Record

Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, were unchanged for a second day at a record 1,316.18 metric tons yesterday, according to the company’s website. Global holdings of the metal by ETFs rose 4 tons to an all-time high 2,062.6 tons yesterday, according to Bloomberg data from 10 providers.

Silver for September delivery in New York lost 0.4 percent to $18.635 an ounce. Platinum for October delivery fell 1.2 percent to $1,552.20 an ounce. Palladium for September delivery declined 1.9 percent to $463.50 an ounce.

To contact the reporters on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net.

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