Photographer: Andrey Rudakov/Bloomberg

Gold Bulls Retreat at Fastest Pace Since 2011 as Rate Hike Looms

  • Open interest slides for 10th session, longest run since 2011
  • Continuing jobless claims in the U.S. fell to 28-year low

Gold bulls are retreating at the fastest pace in more than five years.

Gold open interest, a tally of outstanding contracts on Comex futures, fell for a 10th straight session, the longest stretch since Oct. 5, 2011, data compiled by Bloomberg show. Prices are heading for a third straight weekly loss.

U.S. jobless-benefit rolls are at a 28-year low, a report Thursday showed, adding to evidence of a tight labor market that’s a closely watched indicator by Federal Reserve officials. Fed Bank of Boston President Eric Rosengren urged colleagues to raise interest rates three more times this year and consider starting to shrink the central bank’s balance sheet after their next hike. Higher rates curb the appeal of gold because it doesn’t offer interest.

Bullion futures have fallen more than 5 percent from a five-month high in April as political uncertainty eases in Europe, curbing demand for the metal as a haven. As investors price a rate hike after the Fed’s meeting next month, yields on 10-year Treasuries have been rising, while the S&P 500 Index of equities has been reaching records, luring more investors away from precious metals.

“You’ve had less bargain-hunting and you’ve had more exiting to better performing assets such as the stock market,” George Gero, a New York-based managing director at RBC Wealth Management, said in a telephone interview. “Asset allocators do not like to allocate to gold based on a lack of price improvement.”

Gold futures for June delivery rose 0.4 percent to settle at $1,224.20 an ounce at 1:39 p.m. on the Comex in New York. The metal has lost about 3.5 percent this month.

Hedge funds have also been pulling out. Money managers cut their net-long position, or the difference between bets on price gains and wagers on declines, by 10 percent in the week ended May 2, the first decline in seven weeks. Short positions advanced for a second straight week.

Traders and analysts surveyed by Bloomberg News before the latest U.S. jobless data was released were divided on their outlook for prices.

In other metals:

* Silver futures rose on Comex for a second day after a 16-day losing streak that was the longest slump since 1980.
* Platinum futures gained on the New York Mercantile Exchange, while palladium slipped.

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