Gold Declines After Four Weeks of Gains as Bernanke Pledge Spurs Selling

Gold fell on speculation that four weeks of gains are prompting some investors to sell their holdings after Federal Reserve Chairman Ben S. Bernanke pledged to safeguard the economic recovery.

Gold for immediate delivery weakened as much as 0.3 percent to $1,234.60 an ounce before trading at $1,236.80 at 4:57 p.m. in Singapore. The metal has climbed 4.6 percent in the past month as investors sought protection amid growing evidence that the global economy is sputtering.

“Ahead of the key $1,250 level, the market is taking some rest with some selling pressure spotted,” said Park Jong Beom, Seoul-based trader with Tongyang Futures Co. “Although the long-term uptrend remains intact, gold is down today as stocks rise, reviving risk appetite.”

Asian stocks climbed for a third day after Bernanke said the central bank has the tools to prevent the U.S. economy from slipping back into a recession, while stopping short of indicating an immediate need for more stimulus measures. India will release gross domestic product data tomorrow that may show the fastest expansion in two-and-a-half years, according to a Bloomberg survey.

Bullion strengthened 13 percent this year, reaching a record $1,265.30 an ounce in June, as investors increased holdings to protect their wealth. Gold holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, increased 0.61 metric ton to 1,298.56 tons as of Aug. 27, the company’s website showed.

‘Matter of Time’

“It appears to be only a matter of time before record levels are reached,” Eugen Weinberg, head of commodity research with Commerzbank AG, wrote in a note to clients on Aug. 27. “The festival season in India starts shortly and this will bring stronger demand for gold. Investment demand should profit from continued uncertainty about future economic growth.”

Gold held by exchange-traded funds in India, the world’s biggest buyer of bullion, may surge as much as 17 times in the next three years as investors seek a refuge from financial turmoil and inflation.

Assets may reach “100 tons to 200 metric tons” from 12 tons now, said Rajan Mehta, executive director of Benchmark Asset Management Co., which runs the nation’s first and biggest gold exchange-traded fund. “The growth will definitely be faster than what we have seen in the past.”

Gold for December delivery was little changed at $1,238.40 an ounce on the Comex in New York at 5:10 p.m. Singapore time.

“Analysts are also optimistic that physical demand from major consumers such as India will recover, according to a note to investors by Phillip Futures Pte.

Silver for immediate delivery was little changed at $19.1025 an ounce, platinum was unchanged at $1,533.50 an ounce and palladium dropped 0.3 percent to $503.50 an ounce at 5:12 p.m. Singapore time.

To contact the reporter on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.net

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