Gold Posts First Weekly Loss Since May as Equities Draw Demand

  • U.S. retail sales climbed more than expected in broad advance
  • Gold-fund holdings also set for first weekly decline since May

Gold posted a weekly drop for the first time since May as investors turned to risk assets such as stocks, cutting demand for bullion as a haven.

The metal fell 2.3 percent this week, and holdings in gold-backed funds are also set for the first weekly decline since May. Money has poured into global equities in the past three weeks as speculation grew that policy makers will do more to limit the fallout from the U.K.’s vote to leave the European Union. Retail sales in the U.S. topped forecasts in a broad advance that showed consumers delivered for the economy last quarter.

Bullion futures, which touched a two-year high last week, are still up 25 percent this year on expectations that U.S. interest rates will remain low, making assets that don’t pay interest more attractive. Investors flocked to precious metals as the Brexit vote in June caused immediate turmoil across markets.

“The economy looks better than maybe people thought and the consumer is doing its thing: that suggests that fabled big slowdown didn’t actually happen,” Bart Melek, head of commodity strategy at TD Securities in Toronto, said in a telephone interview. “This should precipitate a bit of downside pressure on gold.”

Gold futures for August delivery dropped 0.4 percent to settle at $1,327.40 an ounce at 2:12 p.m. on the Comex in New York. The weekly drop was the first since May 27.

About $4.6 trillion has been added to the value of global equities since June 27 as the U.S. economy outperforms projections and policy makers signal they will take steps to shore up growth after the U.K. Brexit vote.

Gold Holdings

Holdings in exchange-traded funds backed by gold fell 2.1 metric tons to 2,001 tons as of Thursday, data compiled by Bloomberg show. They’re down 5.3 tons this week.

Investors see just an 8 percent probability of a U.S. rate increase this month, according to Fed funds futures contracts. Still, the chances of a move by September have risen to 23 percent, compared with just 2 percent at the start of the month.

In other precious metals news:

  • Silver imports by India are set to plunge from last year’s record as jewelers grapple with slowing demand and excessive inventories, according to Metals Focus Ltd.
  • Silver futures for September delivery slid 0.8 percent to $20.165 an ounce on the Comex.
  • On the New York Mercantile Exchange, platinum and palladium fell.
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