Gold dropped as some traders deemed an advance to an almost four-month high as excessive and as investors awaited clues on when U.S. policy makers may begin raising interest rates. Silver declined.
Bullion rose 1.3% last week, capping the longest run of weekly gains since 2011, partly as a parent company of Portugal’s second-biggest bank missed debt payments, renewing concern that Europe hasn’t resolved its debt problems. The advance sent gold near a level that signals to some traders that prices may fall. Federal Reserve Chair Janet Yellen will deliver testimony to Congress this week.
Gold climbed 9.6% this year, rebounding from the biggest annual drop in three decades, as the Fed pledged to keep interest rates low for a “considerable time” and amid tension in the Middle East and Ukraine. While hedge funds and other money managers are the most bullish on gold since 2012, Goldman Sachs Group Inc.’s Jeffrey Currie said July 11 he’s keeping his view that gold will decline by the end of the year.
“From a technical perspective, prices appear a mite overstretched,” Abhishek Chinchalkar, an analyst at Mumbai- based AnandRathi Commodities Ltd., said in a report today. “With fund positioning so overstretched on the long side, gold will be vulnerable to a severe pullback in case Yellen’s remarks to Congress are not deemed as being dovish.”
Gold for August delivery fell 1.5% to $1,317.50 an ounce by 7:30 a.m. on the Comex in New York. It rose the past six weeks and reached $1,346.80 on July 10, the highest since March 19. Bullion for immediate delivery dropped 1.6% to $1,317.01 in London, according to Bloomberg generic pricing.
Futures trading volume was 60% above the average for the past 100 days for this time of day, data compiled by Bloomberg show.
Speculators increased their bets on price gains to the highest since November 2012 in the week to July 8, U.S. Commodity Futures Trading Commission data show. Gold’s 14-day relative-strength index was near the level of 70 on July 11, a sign to some traders who study charts that prices were poised to decline. It was at 56.2 today.
Goldman’s Currie restated a call for bullion to drop to $1,050 by the end of the year as the economy improves. Yellen will deliver her semi-annual monetary-policy testimony to the Senate Banking Committee and to the House Committee on Financial Services this week.
“Recently we have seen higher prices across the precious metals complex, most of which, in our view, look toppy,” Barclays Plc analysts wrote in a note today. “Gold will closely watch for any news around the timing of a rate hike, which if earlier than expected, will likely introduce downside risks to the precious metal.”
Silver for September delivery slipped 1.6% to $21.125 an ounce in New York. It reached $21.63 on July 10, the highest since March 17, and gained for a sixth week last week in the longest such run since September 2012.
Palladium for September delivery lost 0.3% to $872.35 an ounce, after reaching $877.75 on July 10, the highest since February 2001. Platinum for October delivery declined 0.7% to $1,502.50 an ounce. It touched $1,523.80 on July 10, the highest since Sept. 4.