Gold Falls as Biggest Rally Since March Spurs Investors to Sell

By Kim Kyoungwha

Sept. 3 (Bloomberg) -- Gold declined from a three-month high on speculation the biggest rally in more than five months may spur some investors to sell holdings and lock-in gains.

Bullion jumped 2.3 percent to $978.50 an ounce yesterday, the biggest gain since March 18, as a decline in equities and the dollar helped fan demand for the precious metal as an alternative investment. Gold has rallied 11 percent this year while the dollar index is down 3.6 percent.

“We should expect some profit-taking after a big rally,” said Toby Hassall, an analyst with CWA Global Markets Pty in Sydney. “If we see a further significant decline in the U.S. dollar or perhaps more weakness in equity markets then I think we might test $1,000 in the coming trading sessions.”

Gold for immediate delivery fell as much as 0.4 percent to $974.37 an ounce and traded at $977.20 at 1:58 p.m. Singapore time. The MSCI Asia Pacific index of regional shares was up 0.1 percent, after a 0.4 percent drop.

The Dollar Index, a gauge of the dollar’s value against six major currencies, was little changed after falling 0.5 percent yesterday.

Breaking through $976 means gold may have resumed a “bull run,” initially targeting $1,033 and then potentially a high of $1,106, according to Barclays Capital. The metal reached a record of $1,032.7 in March 2008.

“After eighteen months of range-trading, gold looks poised to resume its upside trend,” analysts Jordan Kotick and MacNeil Curry, wrote in a report yesterday. “Historically, the time is ripe for a sustained advance. September is the strongest month of the year from a seasonal perspective.”

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, increased 1.53 metric tons to 1,063.36 tons yesterday, according to the company’s Web site.

Among other precious metals for immediate delivery, silver was up 0.4 percent at $15.46 an ounce. Platinum rose 0.5 percent to $1,237.25 an ounce and palladium added 0.2 percent to $286.75 an ounce.

To contact the reporter on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.net