An undated photo of gold bullion. A group of European central banks triggered the biggest one-day increase in gold prices in 13 years Monday with a surprise plan to put a cap on their planned sales of gold bullion. Gold peaked at $285 an ounce in London Monday, more than $16 above the price of $268.60 in late trading Friday. The price fell back to $278.90 in late London trading and was $281.90 in New York late Monday.
Gold traders are bearish for the first time in almost two months as accelerating U.S. economic growth and weaker sales of physical bullion curbed demand for the metal.
Twelve analysts surveyed by Bloomberg expect prices to fall next week, nine were bullish and four neutral. The metal slipped below $1,300 an ounce on Friday for the first time since July 22. Physical demand slowed in the past several weeks, according to Standard Bank Group Ltd.
Gold is heading for the first annual drop in 13 years after some investors lost faith in the metal as a store of value. The slump that wiped $58.9 billion from the value of gold funds hurt investors including hedge fund billionaire John Paulson as well as Barrick Gold Corp. and other mining companies. U.S. equities reached a record last week after data showed the nation expanded 1.7 percent in the second quarter, more than economists had expected.
“Why would I want to hold gold if the U.S. economy is recovering and equities are doing so well?” said Andrey Kryuchenkov, a commodity strategist in London at VTB Capital, a unit of Russia’s second-largest lender. “Physical buying probably won’t be enough to revive gold and have a sustained rebound. The sentiment will still remain bearish.”
The metal fell 22 percent to $1,312.13 an ounce in London this year. Last month’s 7.3 percent gain was the most since January 2012 as prices rebounded from a 34-month low of $1,180.50 on June 28.
Second-quarter U.S. growth was higher than the median projection of 1 percent and more than the 1.1 percent gain in the three months through March. Job gains and rising home and stock prices are shoring up consumer sentiment. Expansion will accelerate over the next four quarters, according to the median of as many as 101 economist estimates.
While gold’s record 23 percent slide in the second quarter spurred demand for jewelry and coins, July’s rally slowed those purchases, Standard Bank said.
The metal for immediate delivery in China averaged about $18 more than the London price since mid-July, Shanghai Gold Exchange data show. That’s lower than the premium of about $33 from mid-April, when bullion entered a bear market.