Gold Drops for First Time in 5 Days as Investment Demand Falls

Gold fell in London after four sessions of gains, heading for the longest run of monthly losses since 1997, as mounting confidence that economies are recovering curbed demand for a protection of wealth.

Gold is set to drop for a fifth month and holdings in exchange-traded products backed by the metal are sliding on signs global economic growth is improving and as some Federal Reserve policy makers advocated more flexibility in stimulus. Global equities reached a four-year high Feb. 20. Bullion gained the past four days amid political turmoil in Italy and as Fed Chairman Ben S. Bernanke defended the central bank’s asset purchases yesterday as a support for the U.S. economy.

“Investors have the tendency to buy less of the precious metal in an environment where growth is stabilizing,” analysts at Credit Suisse Group AG’s private-banking unit said in a report today. “The fundamental background for gold remains reasonably supportive. It is rather that potential gold investors consider other classes more attractive.”

Gold for immediate delivery fell 0.4 percent to $1,607.39 an ounce by 11:15 a.m. in London. It reached a one-week high of $1,620.37 yesterday, rebounding as much as 4.2 percent from the seven-month low of $1,555.55 set on Feb. 21. Futures for April delivery slid 0.5 percent to $1,606.90 on the Comex in New York.

Higher ‘Fixing’

Futures trading volume was 11 percent above the average in the past 100 days for this time of day. Bullion at the morning “fixing,” used by some mining companies to sell output, was at $1,608.50 in London, up from $1,590.50 yesterday afternoon.

ETP holdings fell to a five-month low of 2,530 metric tons yesterday, and are down 3.1 percent this month, the most since April 2008, data compiled by Bloomberg show. The cycle for gold prices has probably turned as the U.S. recovery gathers momentum and investment slows down, Goldman Sachs Group Inc. said in a Feb. 25 report.

The metal is down 4.1 percent this year after 12 annual advances as nations from the U.S. toChina pledged more steps to bolster economic growth. Bernanke dismissed concerns that record easing risks sparking inflation or fueling asset-price bubbles. The Fed is buying $85 billion of Treasury and mortgage bonds each month.

Silver for immediate delivery fell 0.9 percent to $29.1306 an ounce in London. Palladium was down 1 percent at $738.68 an ounce. Platinum lost 0.8 percent to $1,608.90 an ounce.(bloomberg)