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 Posted - 03/17/2009 : 16:33:55
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Gold, Silver Decline on Speculation Economic Turmoil May Ease
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By Pham-Duy Nguyen
March 17 (Bloomberg) -- Gold futures fell for the second straight day on speculation the economy will improve, eroding the appeal of the precious metal as a haven. Silver also declined.
U.S. housing starts surged last month from the lowest level ever, a signal that the real-estate slump may be nearing an end. The U.S. government has pledged $11.6 trillion to revive the economy and ease the banking crisis, according to data compiled by Bloomberg. Gold still is up 3.7 percent this year.
Government “spending could eventually decrease the need for gold as a hedge against financial uncertainty,” said Tom Pawlicki, an analyst at MF Global Ltd. in Chicago. 
Gold futures for April delivery fell $5.20, or 0.6 percent, to $916.80 an ounce on the Comex division of the New York Mercantile Exchange. The metal fell 0.9 percent yesterday.
Silver futures for May delivery dropped 22 cents, or 1.7 percent, to $12.67 an ounce. The metal is still up 12 percent this year.
U.S. equities advanced today on the housing data. The Standard & Poor’s 500 Index still is down 15 percent this year.
“The gold market recently has traded both alongside the equity market and inversely to it,” Pawlicki said. “The theory behind a negative correlation is the safe haven that gold provides, while the theory behind a positive correlation is that higher stocks mean more money will be spent on jewelry.”
Gold’s failure to rally to a record in recent weeks disappointed some investors, analysts said. Last month, the price climbed to $1,007.70, the highest this year. The all-time high of $1,033.90 was reached on this date last year.
“We still hold our insurance gold,” said Dennis Gartman, an economist and the editor of the Gartman Letter in Suffolk, Virginia. “As for trading gold, we are neutral but find ourselves looking for reasons to sell it short.”
Still, investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, has jumped 37 percent this year, pushing the ETF’s holdings of the metal to a record 1,069 metric tons yesterday.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
Last Updated: March 17, 2009 14:15 EDT
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