Bloomberg News

Gold Falls Most in Two Weeks as ECB Cuts Debt-Buying Speculation

December 09, 2011

Dec. 8 (Bloomberg) -- Gold fell the most in more than two weeks after European Central Bank President Mario Draghi said he didn’t signal plans to purchase more bonds to spur growth.

Equities and the euro retreated after Draghi said the ECB’s bond-purchase program was not eternal or infinite, damping speculation that the central bank will increase debt buying to fight the region’s crisis. The U.S. Dollar Index, a six-currency gauge, climbed for the first time in four days.

“The market is once again completely focused on what’s going on in the euro zone,” Matthew Zeman, a strategist at Kingsview Financial in Chicago, said in a telephone interview. “Gold has been acting like any other risk asset. When people go into risk-off mode, gold suffers the consequences, like everything else, while the dollar and Treasuries benefit.”

Gold futures for February delivery declined 1.8 percent to close at $1,713.40 an ounce at 1:42 p.m. on the Comex in New York, the biggest loss for a most-active contract since Nov. 21.

Bullion has retreated 11 percent since reaching a record $1,923.70 on Sept. 6. Prices are still up 21 percent this year, heading for an 11th straight annual gain.

The interest rate for lending gold in exchange for dollars has dropped to the lowest on record as European banks try to secure U.S. currency, according to data compiled by Bloomberg. The one-month lease rate fell to minus 0.57 percent on Dec. 6, the lowest based on data going back to January 1998.

Silver futures for March delivery fell 3.3 percent to $31.538 an ounce on the Comex. The metal is up 1.9 percent in 2011.

On the New York Mercantile Exchange, palladium futures for March delivery declined 1.5 percent to $675.30 an ounce, the first drop in nine sessions.

Platinum futures for January delivery fell 1.8 percent to $1,494.40 an ounce, the biggest loss since Nov. 21.

--Editors: Millie Munshi, Daniel Enoch

To contact the reporter on this story: Yi Tian in New York at ytian8@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net


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