June 23 (Bloomberg) -- Gold futures plunged the most in seven weeks as a slowing economy and a rising dollar eroded the appeal of commodities as an investment and eased the risk of accelerating inflation.
The U.S. economy is recovering at a “moderate pace, though somewhat more slowly” than expected, Federal Reserve Chairman Ben S. Bernanke said yesterday. The Dollar Index gained as much as 1.4 percent, while a plunge in oil to the lowest price since February led the Standard & Poor’s GSCI Index of 24 raw materials to drop as much as 4.7 percent today.
“People are getting out of commodities after we were told yesterday that the economy is growing at a slower pace and is underperforming expectations,” said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. “Crude prices falling points to a lower inflation rate, and you also cannot rule out that some investors are selling gold to cover losses in other markets.”
Gold futures for August delivery declined $32.90, or 2.1 percent, to $1,520.50 an ounce at 1:30 p.m. on the Comex in New York, the biggest loss since May 5. The metal reached $1,559.30 yesterday, the highest since touching a record $1,577.40 on May 2.
“There is flag pattern being formed here which points to lower highs and higher lows,” said James Dailey, who manages $185 million at TEAM Financial Asset Management LLC. said. “We had a false breakout on the upper side yesterday, but prices came down after that.”
Fed policy makers decided not to implement any new stimulus measures after completing $600 billion of bond purchases this month in a second round of quantitative easing, or so-called QE2, intended to revive growth.
Marc Faber, the publisher of the Gloom, Boom & Doom report, still favors gold and silver. In an interview on Bloomberg Television’s “On the Move Asia,” Faber said he will keep accumulating gold, even though prices of the metals may decline in the next three months.
Gold has risen 7 percent this year, heading for an 11th consecutive annual gain.
“Some people will look at today’s drop as a buying opportunity,” Lesh said.
Silver futures for September delivery declined $1.738, or 4.7 percent, to $35.016 an ounce on the Comex, the biggest drop since May 11.
Platinum futures for October delivery retreated $58.20, or 3.3 percent, to $1,697.50 an ounce on the New York Mercantile Exchange, the lowest settlement since Dec. 13.
Palladium futures for September delivery slumped $27.30, or 3.5 percent, to $743.35 an ounce on the Nymex.
--With assistance from Phoebe Sedgman in Wellington and Madelene Pearson in Mumbai. Editors: Millie Munshi, Steve Stroth
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