Gold Drops to Five-Week Low as Economic Gains Curb Demand

Gold futures fell to the lowest in five weeks in New York as the outlook for an improving global economy reduced demand for a haven.

A preliminary China Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics rose to an 18-month high. U.S. jobless claims fell to the lowest since February 2006 last week, a government report today showed. The Standard & Poor’s 500 Index of stocks closed at a record yesterday.

The decline extends losses this month for bullion after unrest in Ukraine and the Middle East helped prices rebound 10 percent in the first half of 2014. Goldman Sachs Group Inc. reiterated a call for gold to drop further by year-end with an accelerating U.S. recovery, even as the bank raised its long-term forecast on the metal.

“People don’t see the need for gold when there are signs of economic strength across the globe,” David Meger, the director of metal trading at Vision Financial Markets in Chicago, said in a telephone interview. “The safe-haven premium because of geopolitical tension is temporary.”

Gold futures for December delivery fell 1.1 percent to settle at $1,292.70 an ounce at 1:41 p.m. on the Comex in New York, after touching $1,289.40, the lowest for a most-active contract since June 19. The metal has lost 2.2 percent this month.

Trading was 43 percent above the average for the past 100 days for this time, data compiled by Bloomberg show.

Today’s decline took bullion below its 100-day moving average. Prices slid 28 percent last year on expectations the Federal Reserve will reduce stimulus as the economy improves.

Economic Recovery

Goldman repeated a forecast for gold to drop to $1,050 by the end of 2014, analysts wrote in a report dated yesterday. The bank said it raised its long-term forecast 13 percent to $1,200 in 2014-dollar terms “to make it more in line with our marginal-cost support level.”

Data from the China Gold Association yesterday showed consumption in the country, which surpassed India as the largest user last year, fell 19 percent in the first half of 2014.

Silver futures for September delivery fell 2.8 percent to $20.415 an ounce on the Comex.

On the New York Mercantile Exchange, platinum futures for October delivery declined 0.9 percent to $1,473.70 an ounce.

Palladium futures for September delivery were 0.4 percent lower at $870.95 an ounce, the fifth straight drop and the longest slump since February.

To contact the reporters on this story: Debarati Roy in New York at droy5@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net

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

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