Gold Prices Drop as Equity Rally Cuts Demand for Havens

Gold futures fell to the lowest in six weeks as a rally in U.S. equities cut demand for the metal as a haven asset.

The Standard & Poor’s 500 Index (SPX) of shares headed for a fifth straight quarterly advance. Bullion tumbled 28 percent last year, the most since 1981, as global equities climbed. Prices dropped 2.9 percent this month as the U.S. recovery gained traction and Federal Reserve Chair Janet Yellen said the central bank’s benchmark rate may rise about six months after monetary stimulus ends, expected later this year.

“The rally in the equity market is keeping prices under pressure,” George Gero, a vice president and precious-metal strategist in New York at RBC Capital Markets, said in a telephone interview. “The market players have been nervous ever since the Fed spoke about higher interest rates.”

Gold futures for June delivery fell 0.8 percent to settle at $1,283.80 an ounce at 1:43 p.m. on the Comex in New York. Prices touched $1,282.70, the lowest for a most-active contract since Feb. 11.

Bullion rose 70 percent from December 2008 to June 2011 as the U.S. central bank pumped more than $2 trillion into the financial system and cut interest rates to a record to boost the economy.

Gold ETPs

Gold has rebounded 6.8 percent since the end of December. Holdings in bullion-backed exchange-traded products are set for the first back-to-back monthly expansion since December 2012, data compiled by Bloomberg show.

Silver futures for May delivery slid 0.2 percent to $19.752 an ounce on the Comex. The metal dropped 7 percent this month, the biggest slump since November.

Platinum futures for July delivery gained 1 percent to $1,420.80 an ounce on the New York Mercantile Exchange. The metal posted its first monthly loss since November.

Palladium futures for June delivery advanced 0.4 percent to $777.10 an ounce on the Nymex, extending the month’s gain to 4.4 percent.

Prices climbed to $802.45 on March 24, the highest since August 2011, on concern that more sanctions by the U.S. and the European Union against Russia and a strike at South African mines will reduce supplies. The countries are the world’s largest suppliers of the metal.

To contact the reporter on this story: Debarati Roy in New York at droy5@bloomberg.net

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

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