Gold fell for a fourth straight day on Tuesday, putting the metal on track for its first monthly drop since August, as selling in gold exchange traded funds (ETF) further undermined investor demand for bullion. Analysts, however, expect gold's 10-year bull run to remain intact due to lingering economic uncertainty, a view confirmed by a comprehensive Reuters poll that called for an average price of $1,450 an ounce in 2011.
Holdings in the SPDR Gold Trust fell 10.926 tonnes to 1,260.843 tonnes on January 24, its largest one-day outflow in three months, after rising more than 20 tonnes in the previous session. It is down about 20 tonnes in January. Spot gold fell 0.2 percent to $1,332.04 an ounce at 1:09 pm EST (1809 GMT), having earlier hit a three-month low at $1,322.70. US gold futures for February delivery settled down $12.2 at $1,332.30.
Spot prices are on course for a 6 percent decline in January, which would be the biggest monthly fall since a 7-percent drop in December 2009. Selling is largely a consequence of a current run of positive economic data. "Nothing fundamentally has changed at all. It's just that too many investors have gotten long (bullish)," said Dennis Gartman, publisher of the Gartman Letter.
However, trade data by the Commodity Futures Trading Commission (CFTC) showed investment interest, measured by the net speculative long bullish position in US gold futures, fell to the lowest level since July of 2009. The significant decline in spec longs has eased some selling pressure, analysts said. The European Financial Stability Facility (EFSF) launched its first sale of bonds and market sources said demand, at 48 billion euros, dwarfed the 5 billion on offer.
"We expect gold prices to continue to climb in 2011 as the resumption of quantitative easing should keep US real interest rates low," Goldman Sachs said in a report. Spot silver fell 0.5 percent to $26.79 an ounce, having earlier fallen to $26.54, its lowest in nearly two months.
ETF flows have also undermined silver. Holdings of metal in the iShares Silver Trust, the world's largest silver ETF, have fallen by 425.3 tonnes so far this month, worth about $364 million at today's prices. Platinum fell for a second day, down 1.8 percent to $1,779.99 an ounce, while palladium fell 3.7 percent to $779.97, set for its biggest daily fall since mid-November.