Gold tumbles as demand for wealth protection falls

London. – Gold fell for the first time in five days in London, set for its biggest annual loss in three decades, as an improving economy cut demand for a protection of wealth. Silver retreated for the first time in more than a week.

Bullion slid to US$1,187.13 an ounce on December 20, near this year’s low set in June, before rebounding to a one-week high of US$1,219.28 last week.

Global equities traded near the highest level since 2007 before reports this week that may show improvements in US housing and manufacturing.

Gold tumbled 28 percent this year, set for the worst annual plunge since 1981.  Some investors lost faith in the metal as a store of value amid a rally in equities and an improving economy, which prompted the Federal Reserve to pare its US$85 billion in monthly bond  purchases.

Holdings in exchange-traded products backed by bullion dropped 33 percent this year to the least since 2009, data compiled by Bloomberg show.

“The market is fearing the impact of tapering,” Peter Fertig, the owner of Quantitative Commodity Research Ltd in Hainburg, Germany, said yesterday by telephone.

“You have firmer equity markets. There’s currently no crisis and nothing that would induce investors to rush into gold.”
Gold for immediate delivery fell 0,8 percent to US$1 203.51 by mid morning in London.

Bullion for February delivery dropped 0,9 percent to US$1 202.90 on the Comex in New York, where futures trading volume was 21 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg showed.

The Fed will probably reduce its bond purchases in US$10 billion increments over the next seven meetings before ending the programme in December 2014, according to the median estimate of economists surveyed by Bloomberg this month.

Gold is set for the first annual drop in 13 years. Holdings in gold-backed ETPs declined 4,9 metric tonnes to 1 767.1 tonnes on December 27, the lowest since November 2009, data compiled by Bloomberg                                                                                            show.

“The perennial bulls have pulled their horns in,” said Jonathan Barratt, chief executive officer of Barratt’s Bulletin in Sydney.
“The underlying theme has been the unanticipated weight of selling from the ETF market,” he said.

Silver for immediate delivery dropped 2,2 percent to US$19 6475 an ounce in London, tumbling 35 percent this year for the biggest slump since 1981. Palladium fell 0,2 percent to US$709,60 an ounce.  Platinum lost 1 percent to US$1 362.85 an ounce. — Bloomberg.