BLBG: Gold Takes Longest Slide Since March as S&P Falls, Dollar Gains
Aug. 10 (Bloomberg) -- Gold fell, extending losses to the longest slide in five months, as declining equities and a rising dollar reduced demand for bullion as a hedge against inflation.
U.S. equities dropped after four straight weeks of gains left shares in the benchmark Standard & Poor’s 500 Index trading at the highest level relative to earnings in more than four years. The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, jumped as much as 0.5 percent. Some investors sell gold when the dollar strengthens.
“There’s some weakness in the stock markets, which has lately been fairly positively correlated with gold,” Peter Fertig, owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said today by telephone.
Gold futures for December delivery slid $12.60, or 1.3 percent, to $946.90 an ounce on the New York Mercantile Exchange’s Comex division. That marked the sharpest drop for a most-active contract since July 28. The metal sank 2.4 percent in the past four sessions, the longest decline since March 4.
Bullion for immediate delivery in London fell $10.15, or 1.1 percent, to $944.80 an ounce at 8:19 p.m. local time, also falling for a fourth straight session. Spot prices advanced 0.1 percent last week, the fourth consecutive increase.
Lower ‘Fixing’
The metal dropped to $945 an ounce in the London afternoon “fixing,” the price used by some mining companies to sell their output, from $953.50 in the morning fixing.
Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, slipped 3.97 metric tons to 1,068.9 tons as of Aug. 7, data on the company’s Web site show. The fund reached a record 1,134.03 tons on June 1.
“With physical demand very low and ETF investors carrying out further pockets of redemptions, the metal is reliant on further fund/speculative buying to fuel rallies,” James Moore, an analyst at TheBullionDesk.com in London, said in a report.
Hedge-fund managers and other large speculators increased their net-long position in New York gold futures by 12 percent in the week ended Aug. 4, according to U.S. Commodity Futures Trading Commission data. Speculative long positions, or bets prices will rise, outnumbered short positions by 193,514 contracts on Comex.
Silver for September delivery sank 31.3 cents, or 2.1 percent, to $14.355 an ounce in New York.
‘Buy on Weakness’
Some investors may buy gold when the price falls, Steve Leuthold, who manages the $1.3 billion Leuthold Core Investment Fund, said today in a Bloomberg Television interview from Minneapolis. He said he plans to increase the share of physical gold in his portfolio to 10 percent by the end of the first quarter of next year, compared with about 2 percent now.
“This is precaution,” Leuthold said. “This is defense.” Leuthold said he “will buy on weakness.”
“The thing is whether we are going to see some fiscal responsibility on the part of the government in actually bringing down this huge expansion of liquidity that we have seen,” Leuthold said. “My concern, and my risk for next year, is that you are going to maintain the same type of expansion position just as the economy is really starting to improve. And that bothers me.”
“That means weakness in the dollar,” Leuthold said. “We are not going to be a Zimbabwe, or anything like that, but you could see a very significant decline in the dollar.”
The dollar index declined 2.2 percent last month as gold rose 3.1 percent.
To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net.
