Gold Falls for Second Day on U.S., Europe Equity Gains

10:58 PM @ Friday - 17 October, 2014
Gold futures fell for the second straight day as gains in equities reduced demand for the precious metal as a haven. Palladium climbed after yesterday approaching a bear market.

The Standard & Poor’s 500 Index rose as much as 1.7 percent, while European shares snapped the longest slump since 2003. U.S. housing starts gained in September after slumping a month earlier, government data showed today. Gold headed for the second straight weekly advance amid global economic concerns.

Last week, the metal dropped to the lowest this year on the outlook for higher U.S. borrowing costs amid gains in the economy. Gold rebounded as the Fed signaled a worldwide slowdown may delay interest-rate increases. Prices slumped 8.4 percent in the third quarter as equities surged to a record.

“The safe-haven buying is unwinding today as the equity market has bounced back,” Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said in a telephone interview. “Also, we are seeing some stronger U.S. data.”

Gold futures for December delivery fell 0.6 percent to $1,233.30 an ounce at 11:27 a.m. on the Comex in New York. Yesterday, the price dropped 0.3 percent.

The metal on Oct. 15 reached $1,250.30, the highest for a most-active contract since Sept. 11. On Oct. 6, gold touched $1,183.30, the lowest since Dec. 31.

Last week, futures climbed 2.4 percent, the most since June. Minutes from the Fed’s September meeting released Oct. 8 highlighted growing concern that the strengthening dollar may hurt exports. Policy makers maintained a pledge to keep interest rates low for a “considerable time.”
Gold’s Allure

Rising rates reduce gold’s allure because the metal generally only offers investors returns through price gains, while a stronger dollar typically cuts demand for a store of value. The metal climbed 70 percent from December 2008 to June 2011 as the Fed bought debt and held borrowing costs near zero percent, boosting inflation concerns.

On the New York Mercantile Exchange, palladium futures for December delivery rose 1.7 percent to $758.50 an ounce. Yesterday, the prices settled 18 percent below the 13-year closing high on Aug. 29, approaching a 20 percent drop that meets the common definition of a bear market.

Platinum futures for January delivery advanced 0.7 percent to $1,261 an ounce. Yesterday, the spot price dropped below gold for the first time since April 2013.

Platinum-group metals fell “on the back of stock-market weakness and perceived global growth slowdown,” David Govett, head of precious metals at Marex Spectron Group in London, said in a note. “Palladium, as the main element in catalytic converters, is being especially hit as the perception that car sales will drop gathers momentum.”

Silver futures for December delivery fell 1 percent to $17.255 an ounce on the Comex. Trading was 50 percent below the average for the past 100 days for this time, data compiled by Bloomberg show.
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