After record run, gold loses some of its glimmer

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After record run, gold loses some of its glimmer

Gold declined as the dollar strengthened ahead of the release of data that’s expected to show the U.S. economy is improving, boosting the case for reduced stimulus, and as higher prices damped reduced demand.

Spot gold fell as much as 0.6 percent to $1,386.22 an ounce and was at $1,390 at 2:55 p.m. yesterday in Singapore. Prices rose 0.6 percent Monday, extending last week’s 2 percent gain, which was the most in a month, as International Monetary Fund data showed central banks including Russia added gold to reserves in April.

Gold has slumped 17 percent this year, while the dollar rallied 5.2 percent against a six-currency basket on speculation the Federal Reserve may scale back quantitative-easing measures that helped bullion cap a 12-year bull run in 2012. Data scheduled for release in the United States yesterday is widely expected to show that consumer confidence improved and regional manufacturing shrank at a slower pace, lifting the Dollar Index 0.2 percent.

“As prospects for the U.S. economy remain positive, expectations are for a withdrawal of QE, supporting the dollar and weighing on gold,” said Feng Liang, an analyst at GF Futures in Guangzhou, a unit of China’s third-biggest listed brokerage. “The initial wave of physical demand after the big price drop has eased and purchases tend to slow down as the price approaches $1,400.”

The Fed currently buys $85 billion of Treasury and mortgage debt a month. Last week, Chairman Ben S. Bernanke said the central bank may cut the pace of asset purchases if policy makers see indications of sustained growth. Spot gold has dropped 5.9 percent in May, heading for a second monthly loss.

The volume for the Shanghai Gold Exchange’s benchmark cash contract shrank to a two-week low of 10,094 kilograms Monday. It had risen to a record after gold dropped to a two-year low of $1,321.95 on April 16. Cash bullion of 99.99 percent purity fell 0.6 percent to 279.24 yuan a gram ($1,418.45 an ounce).

In Hong Kong, consumers were paying premiums of about $3 an ounce, compared with $5 to $6 last week, as physical buying slowed, according to Heraeus Metals Hong Kong. Indian jewelers were paying premiums of $3 to $3.50 to banks, compared with $10 to $12 early this month, said Haresh Soni, chairman of the All India Gems & Jewelry Trade Federation.

Bullion for August delivery, the contract with the highest open interest, traded at $1,389.90 an ounce on the Comex in New York from the close of $1,387.50 on May 24. Monday’s transactions, made during a U.S. holiday, will be booked with today’s trades for settlement purposes.

Platinum rose 0.2 percent to $1,451.65 an ounce, trimming a fourth monthly loss. Holdings in platinum-backed ETPs, up 34 percent this year, rose to a record 62.45 tons on May 24, according to data compiled by Bloomberg. Platinum will end the year at $1,690, according to a Bloomberg survey published May 21.

Cash silver declined 0.7 percent to $22.4805 an ounce, heading for a fourth monthly decline. Palladium fell 0.4 percent to $734.60 an ounce, poised for a monthly advance. Bloomberg
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