Gold, silver fall as dollar's rally may curb investment demand

Gold and silver declined for a second day on speculation the dollar’s rally may reduce demand for precious metals as an alternative investment.

The dollar gained as much as 0.3 per cent on Tuesday against a basket of six major currencies after yesterday touching the lowest since December 18. Before closing lower yesterday, bullion touched a 14-week peak and silver reached its highest in almost nine months.

“Gold has had a very good run and obviously there’s a bit of short-term profit-taking there with some funds being maneuvered around to other areas that have momentum,” said Jamie Spiteri, head dealer at Shaw Stockbroking Ltd in Sydney. “Funds that were defensively parked in gold are being reallocated to some cyclical growth areas.”

Gold for immediate delivery fell 0.5 per cent to $970.58 an ounce. It lost 0.4 per cent yesterday after reaching $988.94, the highest since February 24.

Holdings in the SPDR Gold Trust, the biggest exchange-traded fund (ETF) backed by bullion, rose to a record 1,134.03 tonnes yesterday.

Silver for immediate delivery declined 0.6 per cent to $15.505 an ounce Singapore time after trading between $15.465 and $15.70. The metal touched $15.965 yesterday, the highest since August 8.

“The dollar’s rally put pressure on gold and other commodities,” Takaki Shigemoto, an analyst at Tokyo-based commodity broker Okachi & Co., said on Tuesday by phone. “Although physical demand has declined at current price levels, demand for ETFs is still strong for gold.”

Spot silver has jumped 36 per cent this year, after losing 23 per cent last year, while gold has gained 10 per cent, heading for the ninth straight annual advance. One ounce of gold now buys about 62.6 ounces of silver, according to data compiled by Bloomberg. This is down from a high of 84.39 in October, which was the most since March 1995.

Silver’s 14-day relative strength index, a gauge of momentum, has been above 70 Since May 28, a signal some investors use to indicate prices may be about to decline.

Among other precious metals for immediate delivery, platinum was little changed at $1,215.5 an ounce after rising to $1,231. Palladium fell 0.9 per cent to $238.82 an ounce.