Gold Falls as Improving U.S. Economy, Dollar Cut Demand

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Gold declined in London as signs of an improving U.S. economy and stronger dollar curbed demand for the metal as a protection of wealth. The dollar was little changed near a one-month high versus the euro before a report today forecast to show U.S. retail sales increased for a third month. Close to 70 percent of U.S. economic indicators have outpaced analyst estimates as of May 9, the highest proportion since October 2009, according to a Westpac Banking Corp. gauge.
Gold slid 28 percent last year on speculation the Federal Reserve would reduce monetary stimulus as the economy recovers. The metal rose 7.5 percent this year, partly as the Ukraine crisis spurred demand for a haven. Rebels in eastern Ukraine said they’re seeking to join Russia after disputed referendums as the government in Kiev was handed a deadline to pay for Russian gas to prevent a supply cutoff.
“A positive U.S. macro scenario is, as ever, bearish for gold,” Andrey Kryuchenkov, an analyst at VTB Capital in London, wrote today in a report. Bullion is “ever-so sensitive to the Fed’s policy expectations and the U.S. dollar trade. The market will probably still keep an eye on developments in Ukraine.” Bullion for immediate delivery fell 0.3 percent to $1,292.13 an ounce by 9:28 a.m. in London, according to Bloomberg generic pricing. It touched $1,280.02 yesterday, the lowest since May 2.
Gold for June delivery lost 0.3 percent to $1,292 on the Comex in New York. Futures trading volume was 8 percent higher than the average for the past 100 days for this time of day, data compiled by Bloomberg showed.
UBS Forecasts
UBS AG lowered its one-month gold forecast to $1,250 from $1,280 and cut its three-month outlook to $1,300 from $1,350, it said in a report today. It cited the risk of more exchange-traded-product outflows, a stronger dollar and improving U.S. economic data, while saying any significant changes in India’s gold-import restrictions and escalation in the Ukraine crisis could support the metal. The self-styled Donetsk People’s Republic declared itself a sovereign state yesterday after saying 90 percent of voters backed breaking away from Ukraine a day earlier in a vote rejected by the U.S. and European Union as illegitimate. Separatists in neighboring Luhansk announced a similar move as Russia’s state-controlled gas monopoly, OAO Gazprom, said Ukraine must pay for next month’s supplies by June 2 or its gas will be shut off the next day.
EU foreign ministers froze the assets of companies for the first time, including oil and natural-gas producer Chernomorneftegaz, after they were expropriated in Crimea’s March annexation. They also added 13 people to a list of individuals facing asset freezes and travel bans for destabilizing Ukraine and threatened more measures, along with the U.S., to target entire Russian industries.
Silver for immediate delivery fell 0.4 percent to $19.4698 an ounce in London. Platinum was little changed at $1,438.25 an ounce. Palladium was little changed at $805.75 an ounce. It climbed to $820.90 on May 6, the highest since August 2011. Holdings in exchange-traded products backed by platinum and palladium are at records, data compiled by Bloomberg show.
Source: Bloomberg
Source:Bullion Bulletin

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