Gold falls on US rate-rise expectations – SMH

Posted on March 30, 2011 by


Gold futures fell, capping the longest slump in 11 weeks, on bets that US interest rates will increase as the economy recovers, eroding demand for the metal as an alternative investment.

The Federal Reserve may be able to cut about $100 billion from its plan to buy US Treasury securities as the economy rebounds, St Louis Fed President James Bullard said today. Consumers boosted spending more than forecast in February as the economy grew at a faster rate in the fourth quarter than estimated.

Gold dropped “as the prospects of a sustainable economic recovery improve,” Marc Elliott, an analyst at Fairfax IS in London, said in a report. “Every positive economic figure emerging from the US increases the prospect of interest rate rises.”

On the Comex in New York, gold futures for June delivery fell $US3.80, or 0.3 per cent, to settle at $US1417.50 an ounce. The price dropped for the fourth straight session, the longest slide since January 7.

This quarter, the metal is down 0.3 per cent after climbing for nine consecutive quarters. The price has gained 28 per cent in the past 12 months.

The most-active contract reached a record of $US1448.60 on March 24 as fighting in Libya, Japan’s nuclear crisis and European-debt concerns boosted demand for the metal as an investment refuge.

Silver futures for May delivery fell 10.1 US cents, or 0.3 per cent, to $US36.987 an ounce. The price headed for the ninth straight quarterly gain and has more than doubled in the past 12 months.