Gold bugs 'obliterated' by good news

Gold bugs have taken a beating in the past five days. A raft of upbeat economic data won't ease their pain.
AUG 07, 2013
Gold fell, capping the longest slump since December 2011, as economic concerns eased in the U.S., eroding demand for the metal as an investment hedge. Silver tumbled to a six-month low. U.S. housing-starts data on Wednesday signaled that construction may add to an economic rebound this year. The Standard & Poor's 500 Index of equities has gained 6.9 percent this year, while gold has dropped 5.8 percent. Billionaire investor George Soros cuts his stake in exchange-traded products backed by the metal, government filings showed last week. Bullion extended declines after minutes from a Federal Reserve policy meeting showed some officials said the central bank should vary its asset purchases. “The gold bugs have been obliterated,” James Dailey, who manages $215 million at TEAM Financial Asset Management LLC in Harrisburg, Pennsylvania, said in a telephone interview. “The perception about the global economy has changed, and people are moving to riskier assets.” Gold futures for April delivery fell 1.6 percent on Wednesday afternoon to settle at $1,578 an ounce at 1:44 p.m. on the Comex in New York. The price dropped for the fifth straight session, the longest slump since Dec. 29, 2011. In after-hours electronic trading, prices reached $1,558.10, the lowest for a most-active contract since July 12. Fed officials “emphasized that the committee should be prepared to vary the pace of asset purchases, either in response to changes in the economic outlook or as its evaluation of the efficacy and costs of such purchases evolved,” according to the minutes of the Federal Open Market Committee's Jan. 29-30 meeting released today in Washington. The FOMC at its January meeting decided to continue buying $85 billion in monthly bond purchases. 'Easy Money' “The implication is that they are planning to step back, and that is not good news for gold as easy money will not be available,” Michael Gayed, the chief investment strategist at New York-based Pension Partners LLC, which advises on $190 million in assets, said in a telephone interview. The S&P GSCI Spot Index of 24 commodities slumped as much as 1.6 percent today amid speculation that a hedge fund was selling raw materials. “There is unfounded speculation about a U.K.-based broker or hedge fund under duress forced to close out commodities positions,” Edward Lashinski, director of global strategy and trading at RBC Capital Markets in New York, said in a report. Builders broke ground in January on the most U.S. single- family homes in more than four years and permits for future construction rose, Commerce Department figures showed today. Stimulus 'Pressure' “The economic data is telling us that the economy is definitely showing signs of improvement,” Vedant Mimani, a portfolio manager at Atyant Capital Management Ltd. in Miami, said in a telephone interview. “A lot of sellers came in after gold broke below the psychological $1,600 mark, and concern about the end of stimulus is adding further pressure,” Soros Fund Management LLC reduced its investment in the SPDR Gold Trust, the biggest fund backed by the metal, by 55 percent in the fourth quarter from the third, government filings showed on Feb. 14. Louis Moore Bacon's Moore Capital Management LP sold its entire stake and trimmed holdings in the Sprott Physical Gold Trust. Silver futures for March delivery tumbled 2.7 percent to $28.622 an ounce on the Comex. Earlier, the price touched $28.415, the lowest since Aug. 20. Platinum futures for April delivery declined 3 percent to $1,647.10 an ounce on the New York Mercantile Exchange, the biggest drop since May 23. Palladium futures for March delivery slumped 3.6 percent to $736.40 an ounce, the biggest drop since Oct. 23. --Bloomberg News--

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