Gold Drops Below $1,300 as Stocks Rally Curbs Demand

01:48 PM @ Thursday - 24 July, 2014
Gold fell to the lowest level in a week as a rally in equities damped demand for an alternative investment amid concern that physical consumption is faltering.

Gold for immediate delivery lost as much as 0.6 percent to $1,296.36 an ounce, the lowest since July 16, before trading at $1,297.86 by 11:30 a.m. in Singapore, according to Bloomberg generic pricing. The metal has retreated for three days, and is on course for the first back-to-back weekly drop since May.

Bullion sank 28 percent last year on expectations the Federal Reserve will reduce stimulus. The Standard & Poor’s 500 index rose to a record yesterday as earnings of companies including Facebook Inc. topped estimates. Data yesterday showed gold consumption in China, which surpassed India as the largest user last year, fell 19 percent in the first half of 2014. The metal isn’t likely to get support from Indian demand as import restrictions remain unchanged, according to Commerzbank AG.

“The rally in U.S. equities continues to be a headwind for gold, despite safe-haven buying providing some support to prices,” Victor Thianpiriya, commodity strategist at Australia & New Zealand Banking Group Ltd., wrote in a note today.

Goldman Sachs Group Inc. reiterated a call for gold to drop to $1,050 by the end of 2014 as the U.S. economic recovery accelerates, analysts wrote in a report dated yesterday. The bank raised its long-term forecast 13 percent to the marginal cost support level of $1,200 in 2014-dollar terms.

Ukraine Jets

Gold has rebounded 8 percent this year in part as tensions in Ukraine and the Middle East fueled haven demand. The price failed to advance yesterday even as pro-Russian separatists shot down two Ukrainian fighter jets in the same eastern region where a Malaysian Air passenger jet was destroyed on July 17, the government said.

Gold for December delivery fell as much as 0.6 percent to $1,298.40 an ounce in New York, the lowest since July 16, before trading at $1,300.10. Holdings in the SPDR Gold Trust, the largest bullion-backed exchange-traded product, rose for a second day yesterday, data on its website showed.

Silver for immediate delivery declined 0.5 percent to $20.8065 an ounce. Spot platinum dropped 0.3 percent to $1,477.25 an ounce, while palladium decreased 0.2 percent to $869.75 an ounce.
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