Gold Falls on Investor Sales After Rally; Silver Drops From 30-Year High

Gold futures fell for the first time this week on investor sales following this year’s rally. Silver declined from a 30-year peak, and palladium dropped from the highest since 2001.

In 2010, gold has gained 28 percent, headed for a 10th straight annual gain and outpacing stocks and bonds. The metal reached a record $1,432.50 an ounce on Dec. 7 as physical bullion held in exchange-traded products surged.

“Gold has had an exceptional run,” said Frank McGhee, the head dealer at Integrated Brokerage Services in Chicago. “People are just scoring up for the end of the year.”

On the Comex in New York, gold futures for February delivery fell $7.60, or 0.5 percent, to settle at $1,405.90 at 1:59 p.m. The metal gained 2.4 percent in the previous three days.

“Short-term traders have been active, and you’re seeing some end-of-the-year profit-taking,” said Frank Lesh, a trader at FuturePath Trading in Chicago. “What has really driven the price this year is that gold has emerged as an alternative to foreign currencies and government paper.”

The U.S. Federal Reserve has kept its benchmark interest rate at zero percent to 0.25 percent and plans to buy $600 billion in bonds through June. Europe’s sovereign-debt crisis helped drive gold priced in euros and British pounds to all-time highs yesterday.

‘Regained Ground’

Silver futures for March delivery fell 19.1 cents, or 0.6 percent, to $30.513 an ounce. Earlier, the metal reached $30.93, the highest in 30 years. This year, the price has jumped 81 percent, the second-biggest gain among 19 raw materials in the Thomson Reuters/Jefferies CRB Index.

“Silver this year has regained much of the ground it lost to gold during the beginning of the financial crisis,” McGhee of Integrated said.

Silver dropped 24 percent in 2008 and climbed 49 percent in 2009.

Palladium futures for March delivery dropped $7.20, or 0.9 percent, to $786.20 an ounce on the New York Mercantile Exchange. Earlier, the price advanced to $799, the highest since March 2001.

Platinum futures for April delivery fell $10.90, or 0.6 percent, $1,749.30 an ounce.

Palladium has surged 92 percent this year, and platinum is up 19 percent. The metals are used in jewelry and pollution- control devices in vehicles.

“Palladium has been really bid up because of demand for expanding economies in Asia,” Lesh of FuturePath said.

This year, cotton has jumped 90 percent, the biggest gain among CRB components. Palladium isn’t included in the gauge.

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

To contact the editor responsible for this story: Patrick McKiernan at pmckiernan@bloomberg.net

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