Gold Declines After Equity Gain Reduces Haven Investment Appeal

By Glenys Sim

March 19 (Bloomberg) -- Gold fell in Asia as some investors sold the metal to lock in gains after it gained the most in two months, and as a rally in equities crimped demand for haven investments.

Bullion gained as much as 3.6 percent yesterday, the most since Jan. 23 after the Federal Reserve said it will buy as much as $1.15 trillion in bonds to lower borrowing costs, reviving investor’s concern that inflation will accelerate. The precious metal is little changed this week as the benchmark MSCI Asia Pacific Index jumped 6.8 percent.

“We’re getting some profit taking after the big move last night,” Yang Zhenqiang, an analyst at Yide Futures Brokerage Co., said today from Tianjin. “Quantitative easing on such a large scale can only mean near-to-medium term inflation, which is ultimately good for gold.”

Gold for immediate delivery fell 1.2 percent to $930.88 an ounce at 1:20 p.m. in Singapore. The metal rose to $948.28 yesterday, the highest since March 2, after the Fed pledged to buy as much as $300 billion of Treasuries, up to $750 billion of bonds backed by government-controlled mortgage companies and $100 billion in debt from other government agencies to loosen credit and bolster the housing market.

Asian stocks climbed as much as 2.4 percent after the Standard & Poor’s 500 Index jumped to a one-month high after the Federal Reserve’s announcement.

“If there is a rebound in equity price, maybe there is some money that will come out of the gold market and flow into equity markets temporarily,” said Marc Faber, the publisher of the Gloom, Boom & Doom report, in a March 16 Bloomberg Television interview.

Fund Record

Assets in the SPDR Gold Trust, the biggest such fund backed by bullion, expanded to a record 1,084.33 metric tons yesterday, according to figures on the company’s Web site.

“I’m not giving up on gold. I think we are in the early stages of a longer term upward move in gold simply because wherever you look in the world central banks will print money,” Faber said.

Among other precious metals for immediate delivery, silver fell 1.4 percent to $12.73 an ounce, platinum lost 0.4 percent to $1,055.50 an ounce, and palladium slid 0.3 percent to $198.75 an ounce as of 1:22 p.m. in Singapore.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net
Last Updated: March 19, 2009 02:10 EDT