Gold May Decline on Concern Over Demand

(Corrects extent and scope of ETP silver holdings decline in first and eighth paragraphs of story published yesterday.)

Gold may decline a second day in London on concern physical demand remains slack amid a festival in India. Silver was near a three-month low after holdings in exchange-traded products fell the most since December.

Gold fell to $1,623.55 an ounce yesterday, the lowest level since April 5, on concern the political climate in France and the Netherlands may complicate Europe’s struggle to contain the debt crisis. The Akshaya Tritiya festival, considered an auspicious day to buy precious metals, is celebrated today in India, last year’s biggest bullion buyer.

“India’s jewelry demand or physical interest from the world’s top buyer is very slack in spite of the Akshaya Tritiya festival this week, which is a concern,” Andrey Kryuchenkov, an analyst at VTB Capital in London, wrote today in a report. “Investor interest is limited.”

Bullion for immediate delivery fell 0.1 percent to $1,637.55 an ounce by 11:14 a.m. in London. June-delivery futures were 0.3 percent higher at $1,638 on the Comex in New York.

Gold at the morning “fixing,” used by some mining companies to sell output, rose to $1,638.75 an ounce in London from $1,629 yesterday afternoon.

Holdings in gold-backed exchange-traded products were little changed at 2,394.2 metric tons yesterday, about 0.7 percent below the March 13 record, data compiled by Bloomberg show. Prices are up 4.7 percent in 2012 after advancing for 11 consecutive years.

Central Banks Buy

Central banks are expanding reserves of the metal and bought 439.7 tons last year, the most in almost five decades, the London-based World Gold Council estimates. Mexico boosted its reserves by 16.8 tons to 122.6 tons last month, according to data on the International Monetary Fund’s website. Nations including Turkey, Russia and Kazakhstan also increased bullion holdings in March, the data show.

Silver for immediate delivery was little changed at $30.8625 an ounce after dropping to $30.48 yesterday, the lowest price since Jan. 20. Holdings in ETPs contracted 0.5 percent yesterday.

Palladium rose 0.1 percent to $673.50 an ounce. Platinum was 0.4 percent lower at $1,552.75 an ounce after sliding to $1,550.50, the lowest level since Jan. 25.

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editor responsible for this story: John Deane at jdeane3@bloomberg.net

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