BLBG: Gold Falls to One-Week Low as Growth May Curb Investor Demand
By Claudia Carpenter and Kim Kyoungwha
Dec. 30 (Bloomberg) -- Gold fell to a one-week low in London on speculation U.S. economic growth will curb demand for the precious metal as an alternative to the U.S. dollar.
Silver also dropped as the dollar gained as much as 0.3 percent against a basket of currencies. The Chicago business barometer index probably expanded in December for a third month, economists said before a report today. Gold has dropped 11 percent from a record $1,226.56 an ounce on Dec. 3.
“Gold may fall to $900 before investors and the public at large try to buy and hold the market,” said Bernard Sin, head of currency and metals trading at bullion-refiner MKS Finance SA in Geneva. “I am dollar bullish because I believe the U.S. economy can grow.”
Gold for immediate delivery dropped $4.31, or 0.4 percent, to $1,092.53 an ounce by 9:58 a.m. in London after earlier falling to $1,089.80, the lowest price since Dec. 23. Prices may fall to $900 by the end of the first quarter, Sin said. Gold futures for February delivery fell 0.5 percent to $1,092.70 an ounce on the Comex division of the New York Mercantile Exchange.
February $1,100 call options had the most transactions among gold futures yesterday, according to Comex figures on Bloomberg. April $1,100 had the most put options. Call options are bets that prices will rise above a certain price and put options are bets that prices will fall below a price.
This month, gold is down 7.4 percent, heading for the biggest monthly decline since October 2008. The metal has climbed 24 percent this year and almost quadrupled this decade.
Investor Demand
Demand for gold rose as investors bought the metal to hedge against inflation, as a safe haven from financial crisis and as an alternative to the dollar. Safe-haven demand will probably help gold in 2010, pushing it as high as $1,300, Sin said.
Gold assets in exchange-traded products of ETF Securities Ltd. gained to 7.8 million ounces yesterday from 7.77 million ounces the day before, figures on the company’s Web site show. Holdings in the SPDR Gold Trust, the biggest ETF for the metal, increased 0.1 percent to 1,133.62 metric tons yesterday.
The Institute for Supply Management-Chicago Inc. index was probably 55.1 in December, compared with 56.1 in November, according to the median estimate of 53 economists surveyed by Bloomberg News. Readings above 50 signal expansion. The report is scheduled for release at 9:45 a.m. New York time.
Silver dropped 0.6 percent to $16.99 an ounce and platinum declined 0.1 percent to $1,462.50 an ounce.
Palladium rose as much as 2.2 percent to $395.45 an ounce, the highest since July 2008.
To contact the reporters on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net; Kyoungwha Kim in Singapore at kkim19@bloomberg.net
