Gold Drops as Palladium Set for Biggest Rally Since 2013

New York (Oct 8)  Gold futures headed for the first decline in three days as a rally in the dollar cut the metal’s appeal as an alternative investment. Palladium headed for the biggest three-day gain in more than a year.

The greenback climbed as much as 0.3 percent against a basket of 10 major currencies, as investors look for clues on the timing of the first interest-rate increase since 2006 before the Federal Reserve releases minutes of its September meeting today. Gold slumped 1.9 percent last week, erasing gains for the year, as signs that the U.S. economy is improving added to the case for policy makers to raise rates.

“The dollar is making strides back up again, and that doesn’t help gold,” David Govett, head of precious metals at Marex Spectron Group in London, said in a telephone interview. “You’ve seen people getting out of positions into a bit of a vacuum, and the lower gold went, the more stops that went off.”

Gold futures for December delivery lost 0.4 percent to $1,207.30 an ounce by 11:55 a.m. on Comex in New York. The metal gained 1.6 percent in the previous two sessions.

Bullion climbed as much as 0.7 percent earlier today as China buyers on holiday since Oct. 1 returned to purchase the precious metal.

Fed Minutes

The Federal Open Market Committee will release minutes from its Sept. 16-17 meeting at 2 p.m. in Washington. Improving labor data in September sparked concern that the central bank may raise interest rates sooner than some investors expect. The anticipation of tighter U.S. monetary policy helped push down gold prices 28 percent last year.

On the New York Mercantile Exchange, palladium futures for December delivery added 1 percent to $795.10 an ounce, headed for the biggest three-day advance since July 2013.

Palladium fundamentals remain attractive amid a structural deficit, Morgan Stanley analyst Joel Crane wrote in a report today. The bank raised its 2014 price estimate 3 percent to $825, and its 2015 target by 10 percent to $952.

Platinum futures for January delivery rose 0.6 percent to $1,270 an ounce on the Nymex.

Silver futures slid 0.4 percent to $17.175 an ounce on the Comex, snapping two days of gains.

Source: Bloomberg