Gold retreats, set for worst year in more than three decades

Gold futures fell on Monday, capping three straight days of gains, as holdings in bullion-backed ETPs declined to new multi-year lows following a recent series of upbeat US economic data. Silver fell more than 2% and extended its annual decline to 35%, the most since 1981.

On the Comex division of the New York Mercantile Exchange, gold futures for settlement in February fell by 0.92% to $1 202.80 per troy ounce by 9:09 GMT. Prices held in a daily range between $1 215.80 and $1 202.60 an ounce. The precious metal added 0.3% on Friday and settled the week 0.9% higher.

Gold declined on Monday in a year-end thin trade as holdings in gold-backed exchange-traded products fell to new multi-year lows before the Fed begins trimming its quantitative easing program in the upcoming month. Prices plunged to a six-month low of $1 186.50 per troy ounce on December 19 after policy makers announced their decision to reduce Feds bond purchases by $10 billion to $75 billion. The precious metal was further pressured after a recent series of unexpectedly upbeat economic data from the US supported Fed’s tapering decision and sent equities rallying.

Gold is down 28% this year and is on track to post its worst performance since 1981, capping a 12-year bull run. Assets in exchange-traded funds backed by gold have fallen to the lowest since November 2009. Holdings in the SPDR Gold Trust, the biggest bullion-backed ETP, slid to 801.22 tons on Friday, hitting the weakest level in almost five years. The fund has seen outflows of 41% this year, data on its website show.

Last Thursday, the Department of Labor said that the number of people who applied for initial jobless benefits fell more than expected in the seven days to December 21. Initial Jobless Claims declined to 338 000, outstripping analysts’ projections for a lesser drop to 345 000. The preceding period’s reading received an upward revision to 380 000, up from initially estimated at 379 000.

The Commerce Department reported on Tuesday that bookings for goods meant to last more than three years surged 3.5% in November, sharply exceeding projections for a 2.0% advance.

A separate report showed that purchases of new US homes surpassed analysts’ forecasts and remained near the highest level in five years, signaling the housing market retained momentum despite the rise in mortgage rates. New Homes Sales reached a 464 000 annualized pace, beating analysts’ projections for a drop to 435 000. October’s reading received an upward revision to 474 000, correcting the initial estimate of 444 000 homes sold.

On Monday, the final reading of the Thomson Reuters/University of Michigan consumer sentiment index confirmed the preliminary estimate and touched a five-month high of 82.5, despite trailing expectations for a rise to 83.0.

Christine Lagarde, the International Monetary Fund’s managing director, said the IMF is raising its outlook for the US economy as the reduction in Fed’s bond purchases and a budget deal in Washington eased concerns that the US economic growth might not be sustainable.

Active market players in todays thin trade are awaiting the release of Novembers Pending Home Sales, due at 15:00 GMT. The National Association of Realtors is expected to report that their number jumped by 1.0% last month, offsetting Octobers 0.6% decline.

Elsewhere on the precious metals market, silver futures for settlement in March fell by 1.94% to $19.660 per troy ounce. Prices plunged by 2.52% earlier in the day to of $19.543, while days high stood at $20.178 an ounce. The metal is down 35% this year, headed for the biggest annual decline since 1981.

Platinum for delivery in April traded at $1 363.60 an ounce at 9:26 GMT, down 1.11% on the day, ending a three-day winning streak. The metal rose by nearly 3.3% last week but is down 11% this year. Palladium for settlement in the same month fell by 0.26% to $710.10 an ounce after ranging between days high and low of $714.60 and $708.90 an ounce respectively. The metal rose by 1.8% last week and is set to mark a 1% annual gain in 2013.