Gold Extends Decline for Third Day as Equity Rally Trims Demand

By Glenys Sim

April 20 (Bloomberg) -- Gold dropped for a third day as the strength of global equity markets eroded demand for the precious metal as a safe-haven investment.

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, fell for a second day, dropping 1.2 percent to 1,105.98 metric tons on April 17, the lowest since March 19. The decline in the fund’s holdings may put pressure on bullion at the start of the week, according to UBS AG.

“The decline in the SPDR, while significant, does not yet challenge the view that most holders of gold ETFs are in it for the long-term,” John Reade, UBS’s head metals strategist, said in an e-mail. “Sustained, large declines in holdings of the SPDR will give us cause for concern.”

Bullion for immediate delivery fell as much as 0.4 percent to $865.33. It was at $867.18 at 9:31 a.m. Singapore time.

Gold fell in each of the past four weeks, the longest losing streak since August, on speculation bullion sales by central banks or the International Monetary may depress prices and as U.S., European and Asian stocks capped six straight weekly gains.

Still, gold may climb this week on speculation the decline in prices may boost demand from jewelers and other buyers of the physical metal. Fourteen of 34, or 41 percent, of traders, investors and analysts surveyed by Bloomberg News said gold would advance this week. Eleven of them forecast lower prices and nine were neutral.

Hedge-fund managers and other large speculators increased their net-long position in New York gold futures by 2 percent in the week ended April 14, according to U.S. Commodity Futures Trading Commission data. Speculative long positions, or bets prices will rise, outnumbered short positions by 129,895 contracts on the Comex division of the New York Mercantile Exchange.

Among other precious metals for immediate delivery, silver was little changed at $11.87 an ounce, platinum lost 1.1 percent to $1,196.75 an ounce, and palladium dropped 0.4 percent to $233 an ounce.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net