Gold Futures Decline as U.S. Equity Rally Erodes Metal's Investment Appeal

Gold futures fell as U.S. equities climbed to a two-year high, eroding the appeal of the precious metal as an alternative asset.

Stocks and Treasury yields rose after a report showed the U.S. economy in the third quarter expanded faster than the government estimated and inflation unexpectedly cooled. Gold has gained 27 percent this year, reaching a record on Dec. 7, as the Federal Reserve kept its benchmark interest rate close to zero percent.
“If the stock market rally continues, gold will flatline or go negative,” said Frank McGhee, the head dealer at Integrated Brokerage Services in Chicago.

Gold futures for February fell $1.40, or 0.1 percent, to $1,387.40 an ounce at 1:45 p.m. on the Comex in New York. The price has dropped 3.1 percent from the record $1,432.50.

Losses were limited on speculation that Europe’s sovereign- debt crisis will spread. Gold priced in euros also reached a record on Dec. 7. The cost of insuring Greek debt jumped to a four-week high after Fitch Ratings warned it may cut the nation’s credit rating to junk.

The International Monetary Fund said yesterday it concluded the planned sale of 403.3 metric tons, or 13 percent of its gold reserves.


“Support will come from the completion of the IMF’s gold sales, a bullish year-end seasonal pattern and ongoing worries over European sovereign debt,” Tom Pawlicki, an analyst at MF Global Holdings Ltd. in Chicago, said in a report.

‘Reduced Supplies’
Investors may interpret the IMF sale “to be an indication of reduced supplies from the official sector,” Pawlicki said.
Silver futures for March delivery were little changed at $29.385 an ounce. The metal has jumped 74 percent this year.

Palladium futures for March delivery rose $2.10, or 0.3 percent, to $755.15 an ounce on the New York Mercantile Exchange.

Platinum futures for April delivery climbed $8.70, or 0.5 percent, to $1,735.80 an ounce.
Palladium has surged 85 percent this year, and platinum was up 18 percent.