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Gold Trades Near 7-Week Low as Equity Rally Cuts Demand

Gold posted the longest slump in more than four months as U.S. stocks rose to a record, crimping demand for the precious metal as a haven asset.

The Standard & Poor’s 500 Index of shares has climbed 20 percent in the past year, reaching an all-time high today. U.S. manufacturing expanded at a faster pace in March, a private report showed. German Chancellor Angela Merkel spoke to Russian President Vladimir Putin yesterday and said he had ordered a partial withdrawal of troops from Ukraine’s eastern border.

“The veil of gloom has been lifted, and people are feeling optimistic about the economy,” Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said in a telephone interview. “The safe-haven bids are disappearing as people are not worried about Ukraine any more.”

Gold futures for June delivery slipped 0.3 percent to settle at $1,280 an ounce at 1:47 p.m. on the Comex in New York, after touching $1,277.40, the lowest since Feb. 11. The metal fell for a fifth session, the longest slide since Nov. 13.

Prices slumped 2.9 percent in March, the first loss since December. Federal Reserve Chair Janet Yellen said last month the central bank’s debt-buying program may end this year with interest rates starting to rise in early 2015. Bullion rose 70 percent from December 2008 to June 2011 as the central bank pumped more than $2 trillion into the financial system and cut interest rates to a record in a bid to boost the economy.

“The near-term sentiment for gold appears negative,” Howard Wen, an analyst at HSBC Securities (USA) Inc., wrote in a note. The metal’s recent decline “was largely explained by the combination of receding geopolitical tensions and the Fed’s guidance for higher interest rates.”

Gold ETPs

Bullion tumbled 28 percent last year, the most since 1981, as inflation remained low and U.S. equities rallied. Holdings in gold-backed exchange-traded products slipped 6.4 metric tons yesterday to 1,759.4 tons, the biggest drop since December, data compiled by Bloomberg show.

Silver futures for May delivery fell 0.3 percent to $19.688 an ounce in New York. Prices fell 7 percent in March.

On the New York Mercantile Exchange, platinum futures for July delivery added 0.6 percent to $1,429.60 an ounce.

Impala Platinum Holdings Ltd. said it may buy metal on the open market to meet customer deliveries amid a strike that started in January in South Africa, the world’s largest producer.

Palladium futures for June delivery rose 0.6 percent to $781.95 an ounce on the Nymex. Prices climbed to $802.45 on March 24, the highest since August 2011.

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