Gold slipped more than 1 percent on Monday after US equities opened higher, diminishing the precious metals appeal as a haven from risky investments. Spot gold fell to a low of $914.70 in early afternoon trading and was quoted at $920.80/922.80 an ounce at 1557 GMT from $927.90 late in New York on Friday. US gold futures for April delivery on the COMEX division of the New York Mercantile Exchange fell $7.4 to $922.70 an ounce.
"Weve had a good equity market opening," HSBC analyst James Steel said. "As we got closer to the actual opening itself it became clear that we were going to have a reasonable increase, and that weighed on gold."
World stocks climbed again on Monday for the fifth session in a row as hopes the US economic downturn may be bottoming out lifted appetite for equities. Federal Reserve Chairman Ben Bernanke said on Sunday the United States should start recovering from recession next year. A slight pick-up in risk appetite rippled through the markets because of his comments, with assets such as gold and the dollar, which benefit from risk aversion, dipping as stocks ticked up.
The euro extended gains against the dollar after US Treasury data showed foreign investors sold a record $148.9 billion in US securities in January, adding to concerns about the countrys ability to finance its current account deficit. The uncertain economic outlook and concerns over financial sector stability have driven strong buying of gold and products such as bullion-backed exchange-traded funds (ETFs) since the beginning of the year.
"Gold has been kind of caught mid-way between rising stock markets and investment fund flow through the ETF channel," Pradeep Unni, senior analyst at Richcomm Global Services, said. "Technically it looks like gold has been waiting for stronger clues from the stock markets."
The worlds largest gold-backed exchange-traded fund, the SPDR Gold Trust, said holdings hit a record 1,056.82 tonnes on March 15, up 15.29 tonnes from a day before. ETF Securities said holdings of its Physical Gold, Gold Bullion Securities and GOLD ETCs climbed to 6.97 million ounces on Friday from 6.89 million a week before.
The SPDR trust took over from the Swiss National Bank as the sixth-largest gold holder last week. Further buying in ETFs is likely to support gold, analysts said. "Its likely that additional ETF buying will be seen this week," MF Global analyst Tom Pawlicki said. "Such buying will raise the notion again that investment is enough to make up for the fall-off in jewellery demand."
Golds underlying supply and demand fundamentals were lending little support to prices, analysts said, with jewellery sales still languishing and scrap supply steady. Among other precious metals, spot silver tracked gold down to $12.90/12.97 an ounce from $13.17. Spot platinum was little changed at $1,048/1,053 an ounce from $1,054.50, while spot palladium was steady at $196/201 an ounce from $196.50.