Gold Drops From 1-Year High as Equities Rally Cuts Haven Demand

  • `We’re seeing a little bit of profit-taking in gold:' Shaffer
  • Markets fluctuated on Thursday after ECB stimulus announcement

Investors Moving Back to Gold Amid Global Economic Risks

Gold dropped from a one-year high as a rally in global equities cut demand for the metal as a store of value.

Riskier assets from stocks to commodities and emerging-market currencies surged as investors reassessed European Central Bank President Mario Draghi’s economic stimulus measures. Gold and currency markets were whipsawed Thursday when Draghi asserted after the plan was announced that he didn’t see any need to cut interest rates further.

Bullion rose 19 percent this year as concerns about global growth and a decline in U.S. stocks boosted the metal’s appeal as a haven. Investors see a 77 percent chance the Federal Reserve will raise interest rates by the end of the year, up from 68 percent a week ago, according to Fed-fund futures. Higher rates reduce the appeal of gold, which doesn’t pay interest or offer returns like assets such as bonds or equities.

“Right now with global stocks advancing we’re seeing a little bit of profit-taking in gold,” Fain Shaffer, the president of Infinity Trading Corp. in Indianapolis, said in a telephone interview. “Any positive for the stock market seems to be a negative for gold.”

Gold futures for April delivery declined 1.1 percent to settle at $1,259.40 an ounce at 1:46 p.m. on the Comex in New York, the fourth decline in five days.

Draghi’s stimulus is a response to deflation concerns in the euro area, as well as subdued demand in emerging economies and volatility in financial markets. Demand for gold as a protection of wealth has helped make the metal the best-performing major commodity this year.

Investors have purchased gold through exchange-traded products on all but six days this year. Holdings rose 7.8 metric tons to 1,735.9 tons as of Thursday, the highest since July 2014, according to data compiled by Bloomberg.

  • Silver futures for May delivery rose 0.4 percent to $15.605 an ounce on the Comex.
  • On the New York Mercantile Exchange, palladium gained, while platinum fell.
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