Gold Declines as Equities Rally With Bets on U.S., China Growth

Updated on
  • Rise in equities cuts demand for gold as store of value
  • Report shows gain in U.S. consumer spending, incomes

Gold futures posted a second straight loss as rising global equities and increased optimism on U.S. and Chinese economic growth reduced demand for the metal as a store of value.

The MSCI All-Country World Index of equities headed for its biggest advance in a week. China’s earliest indicators of growth for December showed more signs of stabilization as leaders signaled they’ll do more to prevent a sharp slowdown. Confidence in the U.S. economy rose to a five-month high, according to a report on Wednesday.

Gold touched a five-year low this month before a strengthening U.S. economy prompted Federal Reserve policy to tighten monetary policy, damping the appeal of gold because it doesn’t pay interest. American consumers spent more as income rose in November, adding to the case for further Fed tightening. The dollar rose, reducing demand for gold as an alternative asset.

“The dollar and gold will react to every single economic report that comes, and when they look somewhat favorable, that will pressure gold and it will strengthen the dollar,” James Cordier, the founder of in Tampa, Florida, said in a telephone interview. “With the next rate increase expected three months out, we’re going to go back and forth continually.”

Gold futures for February delivery fell 0.5 percent to settle at $1,068.30 an ounce at 1:35 p.m. on the Comex in New York. The metal slid 0.6 percent on Tuesday, and is down almost 10 percent this year.

Trading on Wednesday was 50 percent below the 100-day average for this time, according to data compiled by Bloomberg.

Silver futures also fell on the Comex. Palladium and platinum futures declined on the New York Mercantile Exchange.