Gold Futures Decline as Investor Demand Eases Following Rally to Record

Gold futures fell as investor demand eased following the precious metal’s rally to a record. Silver dropped from a 30-year high.

The 14-day relative-strength index for gold has been above 70 for nine straight sessions, a signal to some traders that prices are poised to drop. On Oct. 1, the metal reached an all- time high of $1,322 an ounce, climbing to a record for the 11th time since Sept. 14.

“Gold is overdue for a correction,” said Frank McGhee, the head dealer at Integrated Brokerage Services in Chicago. “A lot of people are looking for a correction, and that’s making it a crowded trade.”

Gold futures for December delivery fell $1 to settle at $1,316.80 at 1:42 p.m. on the Comex in New York. The price has climbed 20 percent this year.

“The level of participation in the gold market and the over-extended nature of the market may not be unprecedented, but it is shockingly high nonetheless,” said Dennis Gartman, an economist and editor of the Suffolk, Virginia-based Gartman Letter. While gold “may continue higher, its continued strength means that the inevitable correction shall be violent and very severe,” he said.

Traders Boost Bets

Traders boosted bets that gold will climb. In the week ended Sept. 28, net-long positions on the Comex rose 5.6 percent from the previous week to 257,649 contracts, the highest level since early December, the latest government data show.

Spot gold for immediate delivery dropped as much as 0.5 percent today. The price is heading for its 10th consecutive annual gain, the longest rally since at least 1920.

Silver futures for December delivery fell 2.4 cents, or 0.1 percent, to $22.036 an ounce on the Comex. Earlier, the price reached $22.235, the highest level since October 1980.

The metal reached a record $50.35 in New York in 1980, a year after the Hunt brothers tried to corner the market.

Holdings of silver in exchange-traded-products rose 13.66 metric tons to 13,749.30 tons on Oct. 1, the highest level in at least seven months.

Platinum futures for January fell $10, or 0.6 percent, to $1,672.10 an ounce on the New York Mercantile Exchange.

Palladium futures for December lost $13.60, or 2.4 percent, to $561.30 an ounce.

To contact the reporters on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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