Singapore/London: Gold headed for the first weekly drop since May as investors turned to risk assets such as stocks, cutting demand for bullion as a haven.
The metal fell 2.4 per cent this week and holdings in gold-backed funds are also set for the first weekly decline since May. Money has poured into global equities in the past three weeks as speculation grew that policymakers will do more to limit the fallout from the UK’s vote to leave the European Union.
Bullion, which touched a two-year high on Monday, is still up 26 per cent this year on expectations that US interest rates will remain low, making assets that don’t pay interest more attractive. Investors flocked to precious metals as the Brexit vote in June caused immediate turmoil across markets.
“Rising stocks and bond yields have both helped trigger a healthy consolidation in gold following the surge in recent weeks,” Ole Hansen, head of commodity strategy at Saxo Bank A/S, said by email. “Hedge funds are likely to be have been the main sellers.”
Bullion for immediate delivery lost 0.1 per cent to $1,334 an ounce by 11.18am in London, according to Bloomberg generic pricing. European stocks trimmed gains today following last night’s deadly terror attack in France.
Gold holdings
Holdings in exchange-traded funds backed by gold fell 2.1 metric tonnes to 2,001 tonnes as of Thursday, data compiled by Bloomberg show. They’re down 5.3 tonnes this week.
Investors see just a 6 per cent probability of a US rate increase this month, according to Fed funds futures contracts. Still, the chances of a move by September have risen to 19 per cent, compared with just 2 per cent at the start of the month.
