PRECIOUS-Gold falls to seven-week low on strong U.S. factory data

Tue Apr 1, 2014 5:07pm EDT

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(Adds details on retail performance, platinum group metal
prices)
    By Frank Tang and Jan Harvey
    NEW YORK/LONDON, April 1 (Reuters) - Gold fell to a
seven-week low on Tuesday after firm U.S. manufacturing data
lifted U.S. equities, but strong physical demand from Asia was
expected to underpin prices.
    Bullion came under pressure after data showed U.S. factory
activity rose in March, with production posting its biggest
increase since the recession ended in the latest indication the
economy was regaining its footing after a brutal winter.
 
    Receding geopolitical tensions and fears the Federal Reserve
will raise interest rates next year are also weighing on gold,
analysts said.
    "Given gold's recent drop below $1,300 an ounce, we have
noticed a slight increase in physical demand from Asia. Further
weakness to gold prices may elicit stronger buying from the
emerging markets and help cushion further losses," said James
Steel, chief precious metals analyst at HSBC.    
    Spot gold was down 0.3 percent at $1,279.76 an ounce
by 4:43 p.m. EDT (2043 GMT), having earlier hit $1,277.29 an
ounce, its lowest since Feb. 11.
    U.S. COMEX gold futures for June delivery settled
down $3.80 an ounce at $1,280. Trading volume was about 45
percent below its 30-day average, preliminary Reuters data
showed.
    The S&P 500 closed at a record on Tuesday on the positive
manufacturing data, weighing heavily on gold's appeal as a hedge
against economic uncertainty. 
    Silver was up 0.3 percent at $19.77 an ounce.
    
    RETAIL DEMAND WEAK
    In the retail gold market, buying sentiment among private
bullion investors edged down in March on easing geopolitical
tensions, said a survey by online precious metals market
BullionVault.
    The Gold Investor Index, which measures the balance of
customers adding to gold holdings over those reducing them, was
down to 53 in March from 53.5 in February. A reading of 50
signals an equal number of net gold buyers and sellers.
    Overall client holdings, however, rose during the month, the
company said.
    "Buyers are continuing to build their positions at these
lower price levels which now seem like a bargain," said Miguel
Perez-Santalla, vice president of BullionVault.  
    Institutional investment interest was also weak, with the
world's largest gold-backed exchange-traded fund, the SPDR Gold
Shares, reporting an outflow of 3.9 tonnes on Monday, its
largest one-day outflow in nearly six weeks. 
    Platinum group metals rose on supply worries and encouraging
U.S. auto sales for March. 
    Platinum rose 1.2 percent to $1,425.50 an ounce,
while palladium was up 0.5 percent at $776.10 an ounce. 
 
    
4:43 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
               SETTLE   CHNG  CHNG                       VOL
US Gold JUN   1280.00  -3.80  -0.3  1277.40 1288.40  102,914
US Silver MAY  19.688 -0.064  -0.3   19.635  19.910   30,237
US Plat JUL   1429.60   8.80   0.6  1415.50 1437.20   11,272
US Pall JUN    781.95   4.85   0.6   767.00  782.70    4,736
Gold          1279.76  -3.88  -0.3  1278.25 1288.10         
Silver         19.770  0.060   0.3   19.670  19.890
Platinum      1425.50  16.30   1.2  1416.50 1432.50
Palladium      776.10   4.20   0.5   769.25  780.50
TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
               CURRENT   30D AVG  250D AVG   CURRENT     CHG
US Gold        111,160   196,679   182,829     17.44    0.06
US Silver       38,394    48,024    58,338     24.94   -0.86
US Platinum     11,419    17,961    12,577     17.99    0.66
US Palladium     4,863     6,653     5,795     28.17    0.38

 (Additional reporting by A. Ananthalakshmi in Singapore;
Editing by David Evans, Jane Baird, Meredith Mazzilli and Eric
Walsh)
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