Gold falls to 3-month low on data, profit-taking

For the moment, strong consumer demand, particularly in Asia, continues to provide a floor for spot gold prices, and a significant decline in speculative holdings of gold futures has taken some of the pressure off. (AP)

Gold fell to a near three-month low yesterday, putting the metal on course for its worst monthly performance in 13 months as safe-haven demand evaporated and investors booked further profits on the 2010 rally.

Commodities fell broadly, with US crude oil touching its lowest in nearly two months and copper its lowest since late December. The Reuters-Jefferies CRB index headed for its sharpest loss in three weeks yesterday.

Spot gold fell as low as $1,322.70 (Dh4,907) an ounce and was bid at $1,326.90 an ounce at 1548GMT, against $1,334.25 late in New York on Monday. US gold futures for February delivery fell $18.10 to $1,326.40.

Spot prices are on course for a 6.5 per cent decline in January, which would be the biggest monthly fall since a 7-per cent drop in December 2009. Selling is largely a consequence of a current run of positive economic data.

Rate expectations

"[We forecast gold] to have a bad first quarter," said Mitsubishi analyst Matthew Turner. "Economic data ended the year quite strongly and I thought if it carried on strongly, interest rate expectations would start to rise.

"But maybe the economic outlook isn't as rosy as people think, and maybe we will see a recovery [in gold prices] from second quarter onwards," he said.

For the moment, strong consumer demand, particularly in Asia, continues to provide a floor for spot gold prices, and a significant decline in speculative holdings of gold futures has taken some of the pressure off.

But investor sentiment towards gold has soured in the last few sessions, as evidenced by the largest one-day outflow in three months from the world's biggest exchange-traded gold fund.

Holdings in the SPDR Gold Trust fell 10.926 tonnes to 1,260.843 tonnes on Monday. Adding to the case against gold was strong demand at the Eurozone rescue fund's first debt offer, which helped push the euro to two-month highs.

Usually the dollar's consequent weakness would benefit gold, but the link between the two has weakened in the last year.

The European Financial Stability Facility (EFSF) launched its first sale of bonds and market sources said demand, at ¤48 billion, dwarfed the ¤5 billion on offer.

Longer term, ongoing jitters over growth and expectations interest rates will stay low for now are buoying analysts' expectations for gold, with a Reuters poll of 65 analysts yesterday returning an average 2011 price view of $1,450 an ounce.

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