Gold Sustains Its Worst Drop In Seven Weeks

New York (Apr 25)  Gains for equities are spurring investors to shun gold, with prices posting the biggest tumble in seven weeks. As traders parse economic data for clues on whether U.S. growth is fast enough to warrant a rise in interest rates, advances for shares are diminishing gold's appeal as an alternative. The metal is floundering, and it's been almost two weeks since prices sustained a move in either direction for more than a day, the longest period since September, according to data compiled by Bloomberg.

Prices fluctuated as reports during the week showed conflicting data on the U.S. housing market and orders for business equipment. The Federal Reserve begins a two-day policy meeting on Tuesday. Higher rates diminish the allure of the metal, which usually only provides a return if prices rise, spurring investors to favor assets with better yield prospects such as equities and bonds.

"At this point, what you've had is no real indication that the economy would be slowing enough to back away from a rate increase this year," Frank McGhee, the head dealer at Alliance Financial LLC in Chicago, said in a phone interview. "Even if we have a September rise in interest rates, then that still means we're going to have a rate rise this year."

On the Comex, gold futures for June delivery slumped 1.6% to settle at $1,175 an ounce at 1:43 p.m. in New York, the biggest drop since March 6. Prices extended losses after the Nasdaq Composite Index extended its rally to a record.

Source: InvestorsBusinessDaily