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Gold Set to Snap Five-Week Rally as Demand for Haven Declines

Gold headed for the first weekly loss since December as signs of faster U.S. economic growth increased bets that the Federal Reserve will keep cutting stimulus and a decline in emerging markets eased.

Bullion for immediate delivery traded at $1,243.36 an ounce at 10:07 a.m. in Singapore from $1,243.92 yesterday when it fell to $1,238.17, the lowest in a week. Prices are set to drop 2.1 percent this week, the first weekly loss since the period ended Dec. 20, trimming this month’s 3.1 percent advance.

Gold tumbled 28 percent last year, the most since 1981, as some investors lost faith in the metal as a store of value amid muted inflation and as U.S. equities climbed to a record. Lower prices spurred physical demand in Asia, helping gold rebound from a six-month low of $1,182.52 an ounce on Dec. 31. A rout in emerging-market currencies this week boosted demand for the metal as a haven.

The metal dropped “as previous safe-haven buying possibly related to the emerging-market currency declines and financial market worries evaporated,” James Steel, an analyst at an analyst at HSBC Securities (USA) Inc., wrote in a note dated yesterday. Gold also declined in reaction to “generally positive U.S. economic data,” he wrote.

The Fed said Jan. 29 that it will trim monthly bond purchases by $10 billion to $65 billion. Data yesterday showed U.S. gross domestic product grew at a 3.2 percent annualized pace in the fourth quarter, matching the median forecast in a Bloomberg survey. A Bloomberg index of the 20 most-traded emerging-market exchange rates tumbled 2.6 percent this month.

Gold for April delivery traded at $1,243.10 an ounce on the Comex for a 1.7 percent decline this week. Silver for immediate delivery was at $19.1722 an ounce, rebounding from $19.01 yesterday, the lowest this year. Prices are down 3.9 percent this week and are set for a third monthly loss.

Palladium for immediate delivery was little changed at $708.06 an ounce, set for a 3.7 percent weekly decline. The metal dropped to $706 yesterday, the lowest since Dec. 27. Platinum advanced 0.2 percent to $1,385.56 an ounce, heading for a second weekly loss.

To contact the reporter on this story: Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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