Gold Caps Third Straight Weekly Loss on Interest-Rate Outlook
Gold fell, capping a third straight weekly loss, on speculation that borrowing costs will rise as the economy recovers, eroding the metal’s appeal as an alternative investment. Silver dropped to a seven-week low.
The Dow Jones Industrial Average was heading for an eighth straight weekly gain and the benchmark 10-year U.S. Treasury yield is poised to rise the most in six weeks. Last year, gold outperformed stocks and bonds, gaining 30 percent.
“Higher interest rates take away the bullish argument that low opportunity costs are supportive for gold,” said Tom Pawlicki, an analyst at MF Global in Chicago.
Gold futures for February delivery fell $5.50, or 0.4 percent, to settle at $1,341 an ounce at 1:33 p.m. on the Comex in New York. The metal is down 1.4 percent for the week, after losing 4.3 percent in the previous two weeks.
The Federal Reserve has kept its benchmark interest rate at zero percent to 0.25 percent since December 2008 to bolster the economy. U.S. equities have been rising on optimism for the U.S. recovery.
Holdings in gold-backed exchange-traded products dropped 2.16 metric tons to 2,065.41 tons yesterday, the lowest amount since Aug. 18, according to data compiled by Bloomberg from 10 providers. They reached a record 2,114.6 tons on Dec. 20.
Gold is heading for the first monthly drop since July, after touching a record $1,432.50 an ounce on Dec. 7. Earlier today, the price fell to $1,337, the lowest since Nov. 18.
“We fear a washout to the downside is hard upon us,” said Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter. Gartman said he has reduced his holdings of gold by two-thirds this year.
Silver Holdings
Silver futures for March delivery fell 4.6 cents, or 0.2 percent, to $27.427 an ounce on the Comex. Earlier, the price slipped to $27.08, the lowest since Nov. 30. The metal fell for the third straight week, the longest losing run since March.
Taurus Funds Management Pty sold all the silver holdings in its $200 million precious-metals fund this month because it considers last year’s 84 percent rally excessive, Co-Manager Brenton Saunders said. The fund stuck with a larger bet on gold, he said.
Platinum futures for April delivery climbed $3.70, or 0.2 percent, to $1,822.30 an ounce on the New York Mercantile Exchange, capping a 0.3 percent gain for the week. Palladium for March delivery rose 90 cents to $816.75 an ounce, up 3.3 percent for the week.
To contact the reporters on this story: Tony C. Dreibus in London at tdreibus@bloomberg.net; Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.
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