Gold eases for 4th day as investors exit bullion funds

Reuters

By Jan Harvey

LONDON (Reuters) - Gold extended losses for a fourth straight day on Tuesday as outflows from physical gold funds pointed to weak investment appetite, though a retreat in the dollar took some pressure off prices.

The metal hit its lowest since early April at $1,281.40 an ounce on Monday, after peaking above $1,330 a week before on concerns over Ukraine. Though East-West tensions remain high, gold is no longer benefiting.

Spot gold was down 0.1 percent at $1,287.50 an ounce at 1400 GMT, while U.S. gold futures for June delivery were down 60 cents an ounce at $1,287.90.

"Traders seem to have given up on gold as a provider of safe haven at the moment," Saxo Bank's head of commodity research Ole Hansen said. "Instead the focus remain firmly on the United States, where earnings and economic data continue to indicate interest rates will rise sooner rather than later.

"Hedge funds cut their net-long position back to February levels and total ETP holdings have dropped to a new 2009 low. So with the U.S. healing, Chinese demand questionable and investment demand not showing signs of picking up, gold is back on the defensive."

The dollar drifted down 0.1 percent against a basket of currencies in early trade, surrendering gains that earlier took it to a three-week high. Since gold is priced in dollars, a weaker currency can flatter the gold price.

The SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, reported another drop in holdings on Monday, of 3 tonnes to 792.14 tonnes.

Last week alone, outflows from the fund totalled 9.3 tonnes, erasing all the gains made in the year. Traders said persistent outflows from the top ETF could make any gains hard to hold.

"Holdings of gold-based exchange-traded products fell yesterday to their lowest level since 2010," Deutsche Bank said in a note. "This news has spooked some short-term holders of the metal, as many had thought the significant unwinding that characterised 2013 had come to an end."

ASIAN DEMAND SOFT

Demand was soft overnight in Asia, precious metals house MKS said in a note on Tuesday, a day after gold's discount to spot prices on the Shanghai Gold Exchange widened to $6 an ounce.

"Shanghai were sellers once again with the Shanghai Gold Exchange (arbitrage) remaining in discount and drawing out sellers," it said.

"Any unfavourable developments between Russia and Ukraine still have the potential to propel gold and silver higher as safe havens are sought, but with headlines on this front diminishing and tensions seeming to ease, the metals look to remain heavy in the short term."

Among other precious metals, silver was up 0.1 percent at $19.41 an ounce. Spot platinum was up 0.4 percent at $1,398.25 an ounce, while spot palladium was up 0.8 percent at $782.55 an ounce.

Chief executives of the world's top platinum producers were to meet the leaders of the AMCU union on Tuesday for wage talks, seeking to end the longest and most costly strike at South Africa's mines in living memory.

(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Keiron Henderson/Ruth Pitchford)

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