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The SPDR Gold Trust reported another drop in holdings on Monday, falling three metric tons to 792.14 metric tons. Analysts for Deutsche Bank noted that the news effectively “spooked some short-term holders of the metal, as many had thought the significant unwinding that characterized 2013 had come to an end."
Meanwhile, an upbeat U.S. economic outlook, underscored by strong corporate results, drove the S&P 500 index to a sixth straight day of gains, further weighing on demand for gold as a hedge.
"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 told Reuters. "Instead the focus remains 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."
Earlier, a disappointing U.S. housing market report failed to deter confidence that the U.S. economic recovery remains on track. Data earlier showed U.S. house prices rose 6.9% in the 12 months through February, the smallest gain in a year. Although the report was seen as evidence that the housing market’s recovery is cooling, the significance of the data was not enough to sway analysts’ convictions that the U.S. Federal Reserve will continue tapering the pace of its monthly asset purchase program.
Meanwhile, upbeat regional factory barometers gave support for the greenback. The Richmond Fed manufacturing index jumped to 7 this month, from a reading of -7 in March, beating expectations for a reading of 0.
Elsewhere, concerns over heightened tensions in Ukraine helped temper gold’s losses Tuesday. A diplomatic accord aimed a de-escalating the crisis in Ukraine showed signs of faltering on Monday, with the U.S. and Russia both blaming each other for not implementing the terms of the agreement reached in Geneva last Thursday. The U.S. has drawn up plans for further economic sanctions against Russia if it fails to take concrete steps to implement the terms of the Geneva accord.
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Market News Archive
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