London/Seoul: Gold fell to the lowest level in almost three months in New York as demand for a protection of wealth waned and as holdings in exchange-traded products shrank. Other precious metals slipped.
The euro was little changed near a two-month high against the dollar as the European Financial Stability Facility prepared to sell its first bonds, bolstering confidence in the region’s response to the sovereign-debt crisis.
Bullion is 7.5% below last month’s record. Gold assets in ETPs dropped the most since 7 October on Monday.
“Gold prices are lower as a response to lower risk aversion by the European investment community,” said Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland. “Short-term-oriented investors are reducing long positions in gold.”
Gold futures for February delivery fell as much as $22.60, or 1.7%, to $1,321.90 an ounce, the lowest level since 27 October, and were at $1,324.70 at 8.04 am on the Comex in New York. Prices reached a record $1,432.50 on 7 December. The metal for immediate delivery in London was 0.7% lower at $1,325.55. Bullion declined to $1,326 an ounce in the morning fixing in London, used by some mining companies to sell output, from $1,343 at Monday’s afternoon fixing.
Gold jumped 30% last year after governments spent trillions of dollars and kept interest rates low to bolster economies. Europe’s sovereign-debt crisis also boosted the metal’s allure.
Federal Reserve Chairman Ben S. Bernanke will keep the benchmark rate unchanged at zero to 0.25% at the central bank’s two-day meeting starting on Tuesday, according to economists surveyed by Bloomberg news.
Global investors are becoming more confident about the economic outlook, according to a quarterly poll of Bloomberg subscribers, with almost twice as many saying they will cut gold holdings in the next six months as increase them. More than half said the gold market is a bubble, according to the poll of 1,000 investors, analysts and traders, conducted during 20-24 January.
Gold assets in ETPs dropped 11.12 tonnes to 2,074.11 tonnes on Monday, according to data compiled by Bloomberg from 10 providers. Holdings reached a record 2,114.6 tonnes on 20 December.
“Gold’s decline does look like it’s a result of stronger economic data,” Ben Westmore, an economist at National Australia Bank Ltd, said in an interview on Bloomberg Television on Tuesday.