Gold Declines in London as Equity Strength Curbs Demand

Gold fell in London, after climbing the most in two weeks yesterday, as a gain in equities curbed demand for the metal as a protection of wealth.

Gold jumped 1.7 percent yesterday, the most since May 20, as U.S. manufacturing unexpectedly contracted in May at the fastest pace in four years. The dollar rebounded from a three-week low set yesterday. European equities climbed as Federal Reserve Bank of Atlanta President Dennis Lockhart said recent data suggest the economy isn’t strong enough to justify a reduction in the central bank’s bond-buying program.

“A recovery in the stock market is currently a negative factor for gold,” Peter Fertig, the owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said today by phone. “Investors have an incentive to shift funds from gold into equities,” and a rebound in the dollar is also weighing on bullion, he said.

Gold for immediate delivery fell 0.3 percent to $1,406.90 an ounce by 9:42 a.m. in London. Bullion for August delivery was 0.4 percent lower at $1,406.30 on the Comex in New York. Futures trading volume was 42 percent below the average in the past 100 days for this time of day, according to data compiled by Bloomberg.

Gold slid 16 percent this year as equities rose and on speculation the Fed may scale back quantitative-easing measures that helped bullion cap a 12-year bull run in 2012. Holdings in exchange-traded products fell 3.6 metric tons to 2,144.7 tons yesterday, the lowest since May 2011, according to data compiled by Bloomberg.

U.S. Dollar

The U.S. Dollar Index, a gauge against six currencies, slid 0.9 percent yesterday after a report showed the Institute for Supply Management’s factory index fell to 49, the lowest reading since June 2009. The dollar gauge was up 0.2 percent today.

Silver for immediate delivery fell 0.5 percent to $22.63 an ounce in London. Palladium was down 0.5 percent at $753.45 an ounce. Platinum lost 0.3 percent to $1,491.90 an ounce. Prices reached the highest since May 15 yesterday after a local union official was killed and a second wounded in a shooting near Lonmin Plc (LMI)’s Marikana mine in South Africa, where labor disputes last year disrupted supplies.

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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