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Gold declines as equity advances curb demand for haven assets

March 19, 2016

New York (Mar 19)  Gold futures had a fifth loss in six sessions as gains in equities reduced demand for the metal as a haven.

A gauge of global stocks touched the highest since early January, while the Standard & Poor’s 500 Index rallied to erase losses incurred during the worst-ever start to a year.

Gold, posting a second straight weekly decline that trimmed this year’s rally to 18 per cent, is still the best performer among 22 raw materials on the Bloomberg Commodity Index, topping gains in Treasuries, the dollar, equities and high-yield and investment-grade corporate bonds in 2016. The metal has advanced as investors sought shelter from turbulent financial markets and weakening economies.

Equities are firmer on the day, and that’s driving safe haven demand away from precious metals, David Meger, the director of metals trading at High Ridge Futures in Chicago, said in a telephone interview. We saw a very extended move on gold, so consider this profit-taking or a retracement after the aggressive move to the upside.

Gold futures for April delivery slipped 0.8 per cent to settle at $1,254.30 (Dh4,603.28) an ounce at 1:47pm on the Comex in New York, following Thursday’s 2.9 per cent gain that came after the Federal Reserve signalled a slower pace of US interest-rate increases. Lower rates makes gold more competitive against interest-bearing bonds and equities that offer dividends.

The Fed kept the target range for the benchmark rate at 0.25 per cent to 0.5 per cent, according to a statement Wednesday following a two-day meeting. Policymakers’ updated projections implied two quarter-point increases this year, down from four forecast in December.

Source: GukfNews

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