Gold’s Recovery Falters as Fund Investors Keep Selling Assets

Updated on
  • Holdings in gold ETFs fall a 12th day, longest run in a year
  • Palladium extends advance to highest in almost 18 months

Gold halted its biggest gain in almost a month as investors extended the longest run of sales from bullion-backed funds in a year. Palladium climbed to the highest in almost 18 months.

Holdings in exchange-traded funds backed by gold have fallen for the past 12 days and are heading for the biggest monthly drop in three years. Bullion prices are near a nine-month low as traders are certain that the Federal Reserve will raise U.S. interest rates in December following Donald Trump’s election win. 

Gold futures for February delivery fell 0.3 percent to $1,190.80 an ounce at 1:41 p.m. on the Comex in New York. The metal climbed Monday by the most since Nov. 2. Prices fell below $1,200 last week for the first time since February.

“There’s no indication yet the market has found a bottom,” Frank Cholly, a senior market strategist at RJO Futures in Chicago, said in a telephone interview. “They are liquidating Treasuries and gold and are anticipating rate hikes and good economic growth in the U.S. now that we have a new administration coming in.”

Investors have sold 100.6 metric tons of gold through ETFs so far this month as the outlook for higher U.S. rates curbed the appeal of owning assets that don’t provide a yield. Holdings fell 6.3 tons to 1,887 tons as of Monday, data compiled by Bloomberg show.

Read more: BI’s global precious-metals outlook for 2017

The U.S. economy expanded more than previously reported last quarter on a sunnier picture of household spending, the primary growth engine.

“Selling in ETFs is a consequence of the broader mood that is sweeping across markets, with stronger growth expected for the world economy,” Jens Pedersen, a Danske Bank A/S analyst in Copenhagen, said by phone. “I’m turning more bearish on gold, particularly given the steepening yield curve, which is part of the same story.”

In other precious metals news:

  • Palladium gained for a third day, rising as much as 1.3 percent to $767.65 an ounce on the New York Mercantile Exchange. It has jumped 24 percent this month, the most in more than eight years.
  • Platinum dropped on the Nymex, and silver rose on the Comex.
  • Mining shares were also lower, with Sibanye Gold Ltd. and Randgold Resources Ltd. the biggest decliners.

— With assistance by Ranjeetha Pakiam

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