Gold Drops From Six-Week High as Investors Weigh Demand Outlook

Singapore (Jan 21)  Gold fell, snapping three days of gains that lifted prices to the highest level in almost six weeks, as investors assessed the impact of the rally on demand while the dollar strengthened.

Bullion for immediate delivery lost 0.2 percent to $1,252.82 an ounce at 9:49 a.m. in Singapore after climbing to $1,265.35 yesterday, the highest level since Dec. 10. The Bloomberg Dollar Spot Index rose for a sixth day before the Federal Open Market Committee meets Jan. 28-29.

Volumes for the benchmark contract on the Shanghai Gold Exchange fell to a two-week low yesterday. Stronger physical demand in China, which probably overtook India as the largest consumer last year, helped gold to rebound from a six-month low of $1,182.27 on Dec. 31.

“Gold has been aided higher by physical demand, which tends to pull back when prices go up,” said Zhu Siquan, an analyst at GF Futures Co., a unit of the Guangzhou-based firm that bought Natixis Commodity Markets Ltd. last year. “U.S. economic data and monetary policy, and subsequently the dollar, will continue to be the main drivers.”

Gold’s 12-year bull run ended in 2013 as Federal Reserve policy makers decided to cut monthly bond purchases that fueled gains in asset prices while failing to stoke inflation. Reports last week showed that while retail sales and initial jobless claims beat economists’ estimates, industrial production slowed and consumer confidence unexpectedly dropped.

U.S. Markets

Gold for February delivery was little changed at $1,251.40 an ounce on the Comex in New York, after climbing yesterday to $1,262, the highest price since Dec. 11. U.S. markets were closed for Martin Luther King Day and yesterday’s transactions will be booked with today’s trades for settlement purposes.

Platinum fell 0.3 percent to $1,464.63. Prices rose to $1,472 an ounce yesterday, the highest level since Nov. 7, and an ounce of the metal bought as much as 1.1656 ounces of gold, the most since June 2011. The South African union representing most workers at the world’s top three platinum companies and some of the largest gold mines in the nation yesterday served notice that its members will go on strike over wages.

Silver dropped 0.6 percent to $20.2023 an ounce. Palladium lost 0.3 percent to $747.75 an ounce