With equities making a comeback, the lure of the yellow metal is diminishing.
Gold traded little changed in Asia, heading for a second weekly fall, as investors shifted more funds into shares amid growing optimism that the worst of the global economic slump may be over.
Asian stocks gained for a third day as leaders from the Group of 20 pledged more than $1 trillion in emergency aid to cushion the fallout from the global recession. Manufacturing in China gained last month, orders placed with US factories improved, and house prices in the UK rose.
“The gold price slipped lower, with investors attracted to the equity markets,” said David Moore, chief commodity strategist at Commonwealth Bank of Australia. Some investors buy gold as a store of value at times of financial crisis, selling when perceived risks have declined. Gold for immediate delivery was little changed at $903.90 an ounce in Singapore, after declining 2.5 percent. Bullion was down 2.1 percent last week as the MSCI Asia Pacific Index advanced 1.7 percent.
G-20 policy makers, meeting in London, called for stricter limits on hedge funds, executive pay, credit-rating firms and risk-taking by banks. They tripled the firepower of the International Monetary Fund and offered cash to revive trade to help governments weather the financial turmoil.
“There’s growing optimism that the world economy has reached a bottom,” said Yoshinori Nagano, a senior equity strategist at Daiwa Asset Management Co. Investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, has been unchanged since March 27.
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China’s manufacturing expanded for the first time in six months, according to the Purchasing Manager’s Index, which rose to 52.4 in March from 49 in February. Orders placed with US factories rose 1.8 percent in February, the first gain since July. UK house prices gained 0.9 percent in March.
A UK official said the IMF should consider selling gold reserves to raise cash. International Development Secretary Douglas Alexander said there has been discussion with South Africa about the market effects of a “phased and appropriate sale” of some IMF bullion reserves.
The IMF’s board approved a proposal in April 2008 to sell 403.3 metric tons of bullion as part of a plan to close the Washington-based lender’s annual deficit.
“We expect that the IMF will sell the gold over the next few years, but do not believe that this presents a strong negative risk to gold prices as it will be orderly and maybe even off market,” Morgan Stanley analyst Hussein Allidina said. “Central banks such as those in China, Russia and Japan are obvious counter-parties” to such off-market sales. The IMF is the third-largest holder of gold reserves after the US and Germany, with 3,217 tons in deposits, according to the producer-funded World Gold Council.
Among other precious metals for immediate delivery, silver was down 0.6 percent at $12.89 an ounce, platinum fell 1.4 percent to $1,141.50 an ounce, and palladium was 0.4 percent lower at $221.50 an ounce in Singapore.
The author is a Bloomberg News columnist. The opinions expressed are his own