Gold Declines on Way to Worst Year Since 1981 as Silver Drops

Photographer: Alessia Pierdomenico/Bloomberg

Gold tumbled 28 percent this year, heading for the worst annual loss since 1981. Close

Gold tumbled 28 percent this year, heading for the worst annual loss since 1981.

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Photographer: Alessia Pierdomenico/Bloomberg

Gold tumbled 28 percent this year, heading for the worst annual loss since 1981.

Gold fell for the first time in four sessions in New York, set for its biggest annual loss in three decades, as an improving economy cut demand for a protection of wealth. Silver futures also retreated.

Bullion slid to $1,186 an ounce on Dec. 19, near this year’s low set in June, before rebounding to a one-week high of $1,218.90 on Dec. 27. Global equities traded near the highest since 2007 before reports this week that may show gains in U.S. housing and manufacturing.

“We’re seeing improving economies with little or no inflation,” Frank McGhee, the head dealer at Integrated Brokerage Services in Chicago, said in a telephone interview. “The fear has been stripped out of the market, and absent inflation, I think we’ll see gold continue to grind lower into next year.”

Gold futures for February delivery fell 0.8 percent to settle at $1,203.80 at 1:41 p.m. on the Comex in New York. Trading was 49 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg showed.

Gold has tumbled 28 percent this year, set for the worst annual plunge since 1981. Some investors lost faith in the metal as a store of value amid a rally in equities and an improving economy, which prompted the Federal Reserve to pare its $85 billion in monthly bond purchases. Holdings in exchange-traded products backed by bullion dropped 33 percent this year to the least since 2009, data compiled by Bloomberg show.

“The market is fearing the impact of tapering,” Peter Fertig, the owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said by telephone. “You have firmer equity markets. There’s currently no crisis and nothing that would induce investors to rush into gold.”

Fed Stimulus

The Fed will probably reduce its bond purchases in $10 billion increments over the next seven meetings before ending the program in December 2014, according to the median estimate of economists surveyed by Bloomberg this month.

Bullion is set for the first annual drop in 13 years. Holdings in gold-backed ETPs declined 4.9 metric tons to 1,767.1 tons on Dec. 27, the lowest since November 2009, data compiled by Bloomberg show.

“The perennial bulls have pulled their horns in,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin in Sydney. “The underlying theme has been the unanticipated weight of selling from the ETF market.”

Silver futures for March delivery dropped 2.2 percent to $19.615 an ounce on the Comex. The metal has lost 35 percent this year, on course for the biggest annual slump since 1981.

On the New York Mercantile Exchange, palladium futures for March delivery declined 0.2 percent to $710.80 an ounce. Platinum futures for April delivery fell 0.8 percent to $1,367.20 an ounce.

To contact the reporter on this story: Joe Richter in New York at jrichter1@bloomberg.net

To contact the editor responsible for this story: Millie Munshi at mmunshi@bloomberg.net

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