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Gold Declines as Improving U.S. Economy to Dollar Cut Demand

May 13 (Bloomberg) -- Gold declined in New York as signs of an improving U.S. economy and a stronger dollar curbed demand for the metal as a protection of wealth.

The dollar climbed to one-month high versus the euro after a gauge of German investor confidence declined and before a report today forecast to show U.S. retail sales rose for a third month. Close to 70 percent of U.S. economic indicators have outpaced analyst estimates as of May 9, the highest proportion since October 2009, according to a Westpac Banking Corp. gauge.

Gold slid 28 percent last year on speculation the Federal Reserve would reduce stimulus as the economy recovers. The metal rose 7.4 percent this year, partly as the Ukraine crisis spurred demand for a haven. Russia called disputed referendums in eastern Ukraine a sign of “deep crisis” in its neighbor as rebels there sought to secede and gas export monopoly OAO Gazprom gave Kiev a deadline to pay or risk being cut off.

“A positive U.S. macro scenario is, as ever, bearish for gold,” Andrey Kryuchenkov, an analyst at VTB Capital in London, wrote today in a report. Bullion is “ever-so sensitive to the Fed’s policy expectations and the U.S. dollar trade. The market will probably still keep an eye on developments in Ukraine.”

Gold for June delivery fell 0.4 percent to $1,290.70 an ounce by 7:46 a.m. on the Comex in New York. It touched $1,277.70 yesterday, the lowest since May 2. Futures volume was 11 percent above the average for the past 100 days for this time of day, data compiled by Bloomberg showed.

Bullion for immediate delivery lost 0.4 percent to $1,290.56 in London, according to Bloomberg generic pricing.

UBS Forecasts

UBS AG lowered its one-month gold forecast to $1,250 from $1,280 and cut its three-month outlook to $1,300 from $1,350, it said in a report today. It cited the risk of more exchange- traded-product outflows, a stronger dollar and improving U.S. economic data, while saying any significant changes in India’s gold-import restrictions and escalation in the Ukraine crisis could support the metal.

Facing a military assault by Ukrainian government troops, the self-styled Donetsk People’s Republic on the border with Russia declared itself a sovereign state yesterday. It said 90 percent of voters backed breaking away from Ukraine a day earlier in a ballot rejected by the U.S. and European Union as illegitimate and marred by irregularities. Separatists in neighboring Luhansk announced a similar move.

EU foreign ministers froze the assets of companies for the first time, including oil and natural-gas producer Chernomorneftegaz, after they were expropriated in Crimea’s March annexation. They also added 13 people to a list of individuals facing asset freezes and travel bans for destabilizing Ukraine and threatened more measures, along with the U.S., to target entire Russian industries.

Silver for July delivery fell 0.5 percent to $19.44 an ounce in New York. Platinum for July delivery added 0.3 percent to $1,446.10 an ounce. Palladium for June delivery was little changed at $809.55 an ounce. It touched $822 on May 6, the highest since August 2011.

Holdings in exchange-traded products backed by platinum and palladium are at records, data compiled by Bloomberg show.

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