Gold heads for first weekly loss since May as haven allure fades

[SINGAPORE] Gold was on track for the first weekly drop since May as risk appetite returned and investors turned away from haven assets including bullion and the yen amid record highs for US shares.

Bullion for immediate delivery fell as much as 0.6 per cent to US$1,326.96 an ounce and was at US$1,328.64 by 11:49 am in Singapore, according to Bloomberg generic pricing.

The metal is down 2.8 per cent this week and is holding just above the 20-day moving average of about US$1,325. Silver futures in Shanghai headed for a sixth weekly gain, the longest winning run in two years.

Gold has rallied this year as investors sought a store of value amid turmoil in financial markets following the UK's vote to leave the European Union and concerns over the strength of the global economy.

The gains were cut this week as prospects for additional stimulus from governments and central banks lifted equities, leaving gold near a two-week low and the yen on course for its worst week since 1999.

The pound extended gains after the Bank of England unexpectedly stood pat on interest rates.

"Equities markets have done well so far," Brian Lan, managing director of Singapore-based GoldSilver Central Pte Ltd, said in an e-mail.

"Capital is flowing back to equities at the moment and also currencies as shown in the UK. When the BOE decided to keep interest rates the same, sterling pounds benefited."

Investors will be scrutinising US data before the Federal Reserve's next policy-setting panel meeting on July 26-27 to gauge the strength of the economy. Releases due on Friday include gauges of household spending, inflation, industrial production and consumer confidence.

"Gold prices might be further tested if tonight's data from the US, particularly the retail sales data, is better than expected," Mr Lan said. "This will again bring out the speculation of a rate hike from the Fed."

Investors see only a 6 per cent probability of a rate increase this month, according to pricing in Fed funds futures contracts, though the chances of a move in September have rebounded to 19 per cent - compared with just 2 per cent at the start of the month - with December viewed as a 35 per cent bet. Higher rates damp the appeal of bullion which doesn't pay interest.

In other metals, silver imports by India are set to plunge from last year's record as jewelers grapple with slowing demand and excessive inventories after domestic prices climbed to the highest levels since 2013, according to Metals Focus Ltd.

Holdings in gold-backed exchange-traded funds fell 2.1 metric tons to 2,001 tons on Thursday, data compiled by Bloomberg show.

In China, bullion of 99.99 per cent purity lost 0.4 per cent to 286.25 yuan a gram on the Shanghai Gold Exchange.

Silver for December delivery fell 0.7 per cent to 4,458 yuan a kilogram on the Shanghai Futures Exchange.

Spot silver lost 0.4 per cent and platinum dropped 0.2 per cent. Palladium rose 0.2 per cent for weekly gain to 5.5 per cent.

BLOOMBERG