Gold prices retreat as stocks rally

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GoldArtefact

REUTERS

A golden artefact.

London - Gold edged down towards $1,290 an ounce on Tuesday as a rally in equity markets diverted some buying interest from the metal, and as investment interest and demand for physical gold in Asia remained lacklustre.

European stocks rose on Tuesday, with a major regional index making fresh six-year highs, as a rally in US shares and upbeat updates from blue-chip stocks supported risk appetite.

Gold retreated from its overnight highs as stocks climbed.

Spot gold was down 0.2 percent at $1,292.75 an ounce at 11:37 SA time, while US gold futures for June delivery were down $2.50 an ounce at $1,293.30.

The metal has risen 7 percent this year due mainly to a strong first quarter, with prices little changed from the beginning of April.

It has been caught in a range between $1,285 and $1,315 an ounce since the middle of last month.

“(A break out of that range) would only be caused by an escalation between the West and Russian that would send stock markets down and investors out of risky assets and into safe havens, (such as) government bonds and gold,” Peter Fertig, a consultant at Quantitative Commodity Research, said.

“There is a correlation now between gold and the stock markets.”

The stand-off between pro-Russian separatists and government forces in Ukraine has supported gold over the past month, preventing a break lower.

German Foreign Minister Frank-Walter Steinmeier said in Ukraine on Tuesday he hoped 'round table' talks this week would help disarm the separatists and improve the atmosphere for elections due later this month.

Pro-Moscow rebel leaders in eastern Ukraine called on Monday for their region to become part of Russia, the day after staging a referendum on self-rule, although Moscow stopped short of endorsing their bid for annexation.

 

UNDERLYING GOLD DEMAND SOFT

Investor wariness was already showing, with SPDR Gold Trust, the world's top gold-backed exchange-traded fund, recording an outflow of 2.39 tonnes to 780.46 tonnes on Monday, the first outflow since May 2.

Physical demand across top consumer Asia has at the same time been weak due to volatile prices.

“A few bids emerged (in Asia) in the lead-up to the Chinese open, taking us to the daily high, but that quickly reversed when the demand never eventuated on the Shanghai Gold Exchange,” MKS said in a note early on Tuesday.

“Equity markets were fairly strong, which would have contributed to the metal's softness over the afternoon.”

Among other precious metals, silver was up 0.1 percent at $19.52 an ounce, while spot platinum was up 0.5 percent at $1,439.75 an ounce and spot palladium was up 0.3 percent at $805.25 an ounce.

South African police deployed additional officers to the platinum belt on Tuesday to protect striking miners expected to start returning to work this week, a police spokesman said, as companies pushed ahead with plans to resume production.

It is unclear how many workers will be coming back, but the three platinum firms affected by the action - Impala Platinum, Anglo American Platinum and Lonmin - say a majority of the 70,000 strikers whom they have contacted directly want to end the strike, the longest in South African mining history at nearly four months. - Reuters


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