Gold Tumbles After Rally to All-Time High Prompts Increased Investor Sales

Gold declined after a rally to an all-time high prompted some investors to reduce their holdings even amid persistent concern that the global recovery may be losing momentum.

Immediate-delivery gold, which reached a record $1,661.95 an ounce yesterday, lost as much as 0.6 percent to $1,651.95 and was at $1,656.66 as of 11:32 a.m. in Singapore. The metal’s so- called relative-strength index reached 75 yesterday, above the 70-point level that’s seen by some analysts as signalling a drop.

Gold rallied 2.6 percent yesterday, the most in nine months, after a report showed U.S. consumer spending declined in June, raising concern a slump in jobs-creation is hurting growth. The metal has risen more than 10 percent in the past month as U.S. lawmakers battled to head off a default by raising the debt ceiling.

“The U.S. debt problem has been settled for now and problems in Europe have resurfaced, which will keep gold’s uptrend intact,” Hou Shufeng, an analyst at China Merchants Futures Co., said from Shenzhen. “After such a big jump in prices yesterday, a little bit of profit taking is to be expected.”

The December-delivery contract in New York gained 0.9 percent to $1,658.80 an ounce after reaching a record $1,664.50 yesterday. Futures have rallied 16 percent this year, driven by increased investment demand and buying by central banks.

Holdings in exchange-traded products expanded to 2,173.923 metric tons yesterday, the highest level ever, Bloomberg data show. The assets, which totaled 2,097.231 tons on Dec. 31, have climbed for seven straight sessions.

Thailand, South Korea and Kazakhstan added gold valued at about $2.4 billion to their reserves last month, joining Mexico and Russia in increasing holdings this year as central bankers hedge against depreciating foreign-currency reserves.(Bloomberg)