Gold futures have fallen to a seven-week low as signs of stronger US economic activity and subsiding tensions in Eastern Europe sap investor interest in the haven asset.
Gold for June delivery, the most active contract, on Tuesday fell $US3.80, or 0.3 per cent, to $US1,280 a troy ounce on the Comex division of the New York Mercantile Exchange. This was the lowest settlement since February 10, when futures closed at $US1,274.70 an ounce.
Gold futures have pulled back in recent weeks, as worries about slower US growth and instability in emerging markets subsided, eroding investor appetite for protective assets like precious metals. Meanwhile, a more concrete set of expectations for the continued tensions in Eastern Europe, after Russia annexed Ukraine’s Crimea region last month, have also dented trader interest in store of value assets.
On Tuesday, a stronger reading of US manufacturing activity bolstered investor hopes that the economic recovery remains on track, helping lift US stocks to a fresh record high. The Institute for Supply Management’s manufacturing purchasing managers’ index rose to 53.7 in March from 53.2 in February.
Gold tends to move in the opposite direction to equities, and “it’s bulling back just as the stock market has been rising,” said George Gero, a senior vice president with RBC Capital Markets Global Futures.
Gold prices fell 28 per cent over 2013 while US equities rallied about 30 per cent over the same period, in a divergence that highlights the shift of investor money from protective assets like gold into riskier bets like stocks, Gero said.
Gold prices also continued to face pressure from easing trader concerns about Russia, which began pulling back troops from its border with Ukraine on Monday. While some hailed this as a sign of progress in diplomatic talks, others have raised doubts about the extent of the draw down.
“The market is still under the selling pressure of Crimea … as long as they keep negotiating, why would you want to buy gold?” said Ira Epstein, director of the Ira Epstein division at the Linn Group.
Meanwhile, platinum futures extended their recent gains as the long-running mine worker strike in South Africa bolstered investor worries about supply.
Nymex platinum for July delivery rose $US8.80, or 0.6 per cent, to settle at $US1,429.60 a troy ounce.
South Africa supplies about 80 per cent of the world’s platinum, but a near 10-week long strike by platinum mine workers has cost the industry more than $US1 billion ($A1.08 billion) in lost revenue. The strike is costing about 10,000 ounces in lost output a day across the major platinum producers and could push the global platinum market into a one million ounce supply shortfall in 2014, according to analysts at Thomson Reuters GFMS.
Settlements (ranges include open-outcry and electronic trading):
London PM Gold Fix: $US1,283.75; previous PM $US1,291.75
Jun gold $US1,280.00, down $US3.80; Range $US1,277.40-$US1,288.40
May silver $US19.688, down 6.4 cents; Range $US19.635-$US19.910
Jul platinum $US1,429.60, up $US8.80; Range $US1,415.50-$US1,437.20
Jun palladium $US781.95, up $US4.85; Range $US767.00-$US782.70