Gold fell, capping the longest slump in four years, as the dollar jumped to a 34-month high and a Federal Reserve policy maker said that U.S. monetary stimulus may be reduced within months.
The greenback rose to the highest since July 2010 against a basket of major currencies after Fed Bank of San Francisco President John Williams said yesterday that the central bank may begin to reduce monthly bond purchases as early as the third quarter. Holdings of exchange-traded products backed by gold have dropped every week since mid-February. The Standard & Poor’s 500 Index of equities rose to a record two days ago.
“The market is facing headwinds as global equities continue their path higher, taking institutional investment away from the gold market and central-bank stimulus is gradually withdrawn from the U.S. economy,” Steve Scacalossi, a New York-based vice president at TD Securities Inc., said in a report. “Gold is going to struggle in this strong-dollar environment.”
Gold futures for June delivery fell 1.6 percent to settle at $1,364.70 an ounce at 1:51 p.m. on the Comex in New York. The price dropped for the seventh straight session, the longest slump since March 2009. Earlier, the metal touched $1,357.60, the lowest for a most-active contract since April 18.
Trading was 35 percent above the average in the past 100 days for this time, according to data compiled by Bloomberg.
Gold has tumbled 19 percent this year, falling into a bear market last month as some investors lost faith in the metal as a store of value and equities rallied on confidence that the U.S. economy is improving. The Fed buys $85 billion of Treasury and mortgage debt a month.
“It’s clear that the labor market has improved since September,” when the Fed began its latest round of asset purchases, the San Francisco Fed’s Williams said yesterday in a speech in Portland, Oregon. The central bank may reduce the pace of buying by this summer and end the program late this year, he said.
Yesterday, holdings in ETPs tumbled 7.1 metric tons to 2,207.1 tons, the lowest since July 2011, according to data compiled by Bloomberg. They have dropped 16 percent this year.
Seventeen analysts surveyed by Bloomberg expect prices to fall next week, with eight bullish and three neutral, the highest proportion of bears in two weeks.
Silver futures for July delivery retreated 1.4 percent to $22.352 an ounce on the Comex, extending the week’s decline to 5.5 percent, the biggest in a month.
On the New York Mercantile Exchange, palladium futures for June delivery slid 0.1 percent to $740.25 an ounce. Prices jumped 4.9 percent this week, the fourth straight increase. Last year, the metal’s deficit was the biggest since 2000, Johnson Matthey Plc said in a report on May 13
Platinum futures for July delivery slipped 1.2 percent to $1,468 an ounce, dropping for the second straight week.