Gold Wipes Out This Month's Gains Amid Firming U.S. Labor Market

  • Equity rally seen eroding demand for bullion as store of value
  • Holdings in exchange-traded funds drop for first session in 10

Gold slipped, wiping out this month’s gain, as signs of a strengthening U.S. labor market and a rally in equities curbed demand for haven assets.

Companies took on 200,000 workers in March, beating a median forecast of 195,000 in a Bloomberg survey, and adding to evidence of a firming labor market, according to figures Wednesday from the Roseland, New Jersey-based ADP Research Institute. Stocks around the world advanced and oil gained for the first time in five days.

“It really looks like gold has topped out,” Michael Smith, the president of T&K Futures & Options Inc. in Port St. Lucie, Florida, said by telephone. “Any good economic news is going to be bad for gold.”

Gold futures for June delivery declined 0.7 percent to settle at $1,228.60 an ounce at 1:45 p.m. on the Comex in New York. On Tuesday, prices gained 1.3 percent, the biggest advance since March 17, after Federal Reserve Chair Janet Yellen reasserted a gradual approach to raising interest rates. Prices are down 0.5 percent this month.

Spot prices, which traded at $1,227.22 Tuesday will drop to $1,130 by September as the rally in the Standard & Poor’s 500 Index prompts investors to reevaluate their pessimism on the U.S. economy and back away from gold, Jeffrey Christian, the New York-based managing partner at CPM, said in an interview.

‘Bit Overdone’

“Yesterday, the Fed did it again in helping gold higher as it pushed back rate rise expectations,” said Matthew Turner, a precious metals analyst at Macquarie Group Ltd. in London. “Today, it looks as if the buying had been a bit overdone, since even if the U.S. is stumbling towards a rate rise, it will get there eventually.” 

Gold is still this year’s best performing commodity on speculation the Fed will refrain from tightening to protect the recovery in the world’s largest economy. In comments at the Economic Club of New York, Yellen indicated deteriorating world growth warranted a slow approach. Futures now show traders now see no chance of a change in policy next month and only a 47 percent likelihood of an increase by November.

Metal held in exchange-traded funds declined 0.6 percent to 1,761.2 metric tons, according to data compiled by Bloomberg as of Tuesday. The MSCI World Index added 0.9 percent for a fourth-straight advance. Silver futures also fell on the Comex.

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