Gold Falls Most in Seven Weeks as Comex Margins Rise 22%, Equities Rally

Gold futures fell the most in seven weeks in New York as equities rebounded and CME Group Inc. (CME) boosted margins to trade Comex contracts, prompting investor sales after a rally to a record topping $1,800 an ounce.

The Standard & Poor’s 500 Index rose as much as 4.5 percent after a drop in U.S. jobless claims. CME Group, owner of the world’s largest futures market, raised margins on gold by 22 percent. The minimum amount of cash that speculators must keep on deposit for an initial account increased to $7,425 on a 100- ounce contract from $6,075.

“The strength in equities, coupled with the increase in margins, is pushing gold down,” Matthew Zeman, a strategist at Kingsview Financial in Chicago, said in a telephone interview. “Investors are waiting for a deeper correction before they start buying again.”

Gold futures for December delivery declined $32.80, or 1.8 percent, to close at $1,751.50 at 1:39 p.m. on the Comex in New York, the biggest decline since June 23. Earlier, the metal climbed as much as 1.9 percent to a record $1,817.60. The price fell as low as $1,734.50 after the settlement.

In the previous three days, gold jumped 8 percent after S&P cut the U.S. credit rating one level from the top AAA grade on Aug. 5. The metal has surged 46 percent in the past year on demand for an investment haven as U.S. and European debt escalated. On Aug. 8, the S&P 500 tumbled to an 11-month low.

“As the economic problems around the world continue to manifest, more and more people are identifying that gold is the ultimate safe-haven asset,” Nick Barisheff, the president of Toronto-based Bullion Management Group Inc., said in an e-mail.

Escalating Fears

Dennis Gartman, who correctly forecast the slump in commodities in 2008, said he was “surprised” that gold hasn’t declined more after the CME announcement.

“This is long overdue, and the CME is correct in having done so,” Gartman said in his Suffolk, Virginia-based newsletter.

Gold may rebound on European fiscal woes, Andrey Kryuchenkov, an analyst at VTB Capital in London, said in a report.

“Escalating fears over peripheral debt troubles in the euro zone and of a sovereign downgrade on France, with the country’s banking sector taking a heavy hit yesterday due to hefty exposure to Italy,” may boost demand for gold as a haven, Kryuchenkov said.

Silver futures for September delivery fell 65.8 cents, or 1.7 percent, to close at $38.669 an ounce in New York.

Platinum futures for October delivery advanced $20.70, or 1.2 percent, to $1,792.40 an ounce on the New York Mercantile Exchange. Palladium futures for September delivery rose $7, or 1 percent, to $733.80 an ounce.

To contact the reporters for this story: Tony C. Dreibus in London at tdreibus@bloomberg.net; Debarati Roy in New York at droy5@bloomberg.net.

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

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