Gold futures fell the most in five months as Cyprus plans to sell the metal to raise money, while minutes from a Federal Reserve meeting spurred speculation that U.S. stimulus will be curbed.
Cypriot authorities committed to sell “the excess amount of gold” owned by the state, yielding an estimated 400 million euros ($522 million), according to a draft of a European Commission report obtained by Bloomberg News. Several members of the Federal Open Market Committee said the U.S. central bank should begin scaling back debt purchases, minutes from a March meeting showed today. The Standard & Poor’s 500 Index of equities rose to a record.
“Cyprus selling gold was a big blow,” Tom Power, a senior commodity broker at R.J. O’Brien & Associates in Chicago, said in a telephone interview. “Prices were already under pressure because of the Fed’s comments and the stock market rally.”
Gold futures for June delivery fell 1.8 percent to settle at $1,558.80 an ounce at 1:38 p.m. on the Comex in New York, the biggest drop for a most-active contract since Nov. 2.
Cyprus had 13.9 metric tons (446,895 ounces) of gold as of March 31, according to data from the World Gold Council. The holdings were valued $696.6 million, based on today’s Comex settlement.
Data from the London-based council data show the U.S. as the top gold holder with 8,133.5 tons, followed by Germany with 3,391.3 tons. Cyprus was ranked 61st.
Central banks added 534.6 tons to reserves last year, the most since 1964, partly to diversify their currency holdings, according to the council. Barclays forecasts 300 tons of purchases in both 2013 and 2014.
Goldman Sachs Group Inc. cut its three-month price target to $1,530 from $1,615 and lowered its 12-month forecast to $1,390 from $1,550, and said the turn in the price cycle is accelerating as the U.S. economy strengthens.
“The end of quantitative easing is destructive for gold as it’s taking inflation off the table,” Sterling Smith, a Chicago-based commodity futures specialist at Citigroup Global Markets Inc., said in a telephone interview. “The sentiment is very bearish.”
The Fed is buying $85 billion of debt a month and has said further improvement in the labor market is needed for the central bank to consider reducing its record monetary easing.
Gold has dropped 7 percent this year after 12 straight annual gains. Holdings in the SPDR Gold Trust, the biggest exchange-traded product backed by the metal, fell to 1,200.4 tons yesterday, the lowest since June 2011.
Silver futures for May delivery fell 0.8 percent to $27.653 an ounce on the Comex. The price has dropped 8.5 percent this year.
On the New York Mercantile Exchange, palladium futures for June delivery slumped 1.7 percent to $720.85 an ounce. Earlier, the price touched $704, the lowest since Jan. 15.
Platinum futures for July delivery dropped 1.5 percent to $1,529.80 an ounce.