Gold fell the most this month on signs of waning investor demand from the US to China. The metal pared losses amid rising tensions in Ukraine.
Violent conflicts in the Middle East and Eastern Europe helped boost prices 8.6 per cent this year. Investors haven't been enticed by the gains, sending open interest in New York futures and options to the lowest since 2009 and money managers have trimmed their bullish wagers. Demand for the precious metal fell 16 per cent in the second quarter, led by declines in India and China, the World Gold Council said this week.
The 2014 bullion rally defied bearish forecasts from Goldman Sachs Group Inc and beat gains for broad measures of equities, bonds and commodities. Holdings in the SPDR Gold Trust, the biggest exchange-traded product backed by the metal, are headed for second straight weekly loss. Billionaire hedge fund manager John Paulson has kept his holding in the fund unchanged for four straight quarters.
Gold futures for delivery in December fell 0.7 per cent to settle at $1,306.20 an ounce at 1:37 pm on the Comex in New York, the biggest drop since July 31. Trading was 44 per cent above the 100-day average for this time, data compiled by Bloomberg show.
Prices, which earlier dropped as much as 1.7 per cent, pared losses after Ukraine said its troops attacked and partially destroyed an armed convoy that had crossed the border from Russian territory. The Foreign Ministry in Moscow said it was concerned about potential attempts to disrupt a humanitarian convoy and repeated a call for a cease-fire to allow for aid delivery.
The metal will slide to $1,050 in 12 months, Goldman reiterated in a July 23 report, unchanged from its outlook at the start of the year. The bank cited accelerating US economic growth. Bullion tumbled 28 per cent last year, the biggest drop in three decades, as the Federal Reserve moved toward ending monetary stimulus. Wholesale prices in the US rose at a slower pace in July, the Labor Department said today.
"Today's number shows that concerns about inflation were unfounded," Cordier said. "The Fed's decision on interest rates and economic growth in the country will be the long-term drivers of gold."
Silver futures for September delivery fell 1.9 per cent to close at $19.525 an ounce on the Comex, the biggest drop since August 5. Prices are down for the fifth straight week, the longest run of losses since April 19, 2013.
On the New York Mercantile Exchange, palladium futures for September delivery climbed 0.9 per cent to $894.50 an ounce. Earlier, prices rose to $896, the highest since 2001. Platinum futures for October delivery fell 0.8 per cent to $1,457.20 an ounce, extending the week's loss to 1.4 per cent.