Gold Heads for Worst Quarterly Run Since 2001 Amid Weak Demand

By Sungwoo Park

Gold headed for a second quarterly loss as holdings in exchange-traded products fell by the most on record and the dollar climbed on prospects for a U.S. recovery, eroding the metal’s allure as an alternative investment.

Bullion for immediate delivery traded little changed at $1,605.99 an ounce at 2:49 p.m. in Seoulfrom $1,605.25 yesterday. Prices have fallen 4.1 percent this quarter in the first back-to-back three-month losses since 2001. The metal touched $1,555.55 on Feb. 21, the cheapest since July 2012.

Holdings in ETPs contracted 6.9 percent this quarter amid speculation that the U.S. Federal Reserve will rein in stimulus. The Dollar Index (DXY), a gauge against six major counterparts, rallied to the highest level since August yesterday as the euro fell. Banks in Cyprus planned to open for six hours today with capital restrictions in place after shutting for almost two weeks as the nation faced financial collapse.

“The Cyprus woe continues, which actually boosts the dollar,” Lelia Kim, a metals trader at Tong Yang Securities Inc., said by phone from Seoul. A “stronger dollar limits gold’s gains, coupled with weak physical demand for the metal.”

Gold for June delivery was little changed at $1,606.10 an ounce on the Comex in New York. ETP holdings totaled 2,451.01 metric tons, poised for a seventh weekly decline. Bullion typically trades counter to the U.S. currency.

While gold and silver lack momentum to go much higher, platinum and palladium have better prospects as they are less dependent on investment flows, the private-banking unit at Credit Suisse Group AG said in a report yesterday. Gold rallied for a 12th year in 2012 as central banks boosted stimulus.

Spot platinum rose 0.2 percent to $1,585.16 an ounce, poised for a quarterly advance. Holdings in ETPs expanded to a record 52.346 tons, according to data tracked by Bloomberg.

Silver for immediate delivery rose 0.2 percent to $28.74 an ounce, paring a second quarterly decline. Palladium fell 0.3 percent to $764.95 an ounce, trimming a third quarterly gain.

To contact the reporter on this story: Sungwoo Park in Seoul at spark47@bloomberg.net

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