Gold Declines to One-Week Low as U.S. Housing Data Damps Commodity Outlook

Gold futures fell to a one-week low as signs that the U.S. economy is slowing eroded the appeal of commodities. Silver dropped more than 2 percent.

Housing starts declined unexpectedly in April, and any recovery in construction may take years because unemployment is lingering around 9 percent and wages are stagnant. The Thomson Reuters/Jefferies CRB Index of 19 raw materials dropped for the third straight session.

“Precious metals may have difficulty advancing due to ongoing liquidation of commodity trades,” said Tom Pawlicki, an analyst at MF Global Holding Ltd. in Chicago. “Slowing economic growth has created pressure in stocks and energies and pressured metals from the deflation angle.”

Gold futures for June delivery fell $10.60, or 0.7 percent, to settle at $1,480 an ounce at 2 p.m. on the Comex in New York. Earlier, the price touched $1,471.10, the lowest for a most- active contract since May 6. The metal is down 6.2 percent from a record $1,577.40 on May 2.

Soros Fund Management LLC, founded by billionaire George Soros, sold 99 percent of its holding in the bullion-backed SPDR Gold Trust during the first quarter, according to a government filing yesterday. The fund also shed all 5 million shares in the iShares Gold Trust and cut stakes in NovaGold Resources Inc. and Kinross Gold Corp., the filing showed.

“It will be clear to own gold” when spot prices touch $1,425, said Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter.

Luring Investment

Gold has rallied for more than a decade, attracting investors including Soros and hedge-fund founder John Paulson. Paulson & Co. maintained 31.5 million shares in the SPDR Gold Trust during the first quarter, and boosted holdings of mining companies including Barrick Gold Corp. and Gold Fields Ltd., according to the fund’s filing with the U.S. Securities and Exchange Commission.

Silver futures for July delivery declined 64.1 cents, or 1.9 percent, to $33.491 an ounce on the Comex. The price has tumbled 33 percent from a 31-year high of $49.845 on April 25.

Palladium futures for June delivery rose 75 cents to $714.25 an ounce on the New York Mercantile Exchange. Platinum futures for July delivery gained $1 to $1,761 an ounce.

(Source: http://www.bloomberg.com/news/2011-05-17/gold-declines-to-one-week-low-as-u-s-housing-data-damps-commodity-outlook.html)