Gold Falls for Fourth Day on Equity Rally; Silver Prices Tumble

Feb. 26 (Bloomberg) -- Gold fell in New York for a fourth straight day, the longest slide in a month, on speculation equities will rebound, reducing the appeal of the precious metal as an alternative investment. Silver sank the most in 12 weeks.

The Standard & Poor’s 500 Index gained as much as 1.9 percent after dropping 8.4 percent from Feb. 12 through yesterday. Stocks rallied on President Barack Obama’s proposal to add as much as $750 billion to bank bailout funds. Investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, remained unchanged for a fourth straight day after rising 4.4 percent last week to a record 1,029 metric tons.

“The news isn’t that great but what’s changed over the last couple of days is details from the administration,” said Tom Hartmann, a commodity analyst at AltaVest Worldwide Trading Inc. in Mission Viejo, California. “That might give equity markets a little more confidence. There isn’t a lot right now that can bring in a new wave of buying for gold.”

Gold futures for April delivery fell $23.60, or 2.4 percent, to $942.60 an ounce on the Comex division of the New York Mercantile Exchange. The last time gold fell for four straight sessions was Jan. 12 through Jan. 15. The metal is still up 6.6 percent this year.

The budget plan sent to Congress today forecasts spending of $3.55 trillion in the 2010 fiscal year, which begins Oct. 1, with the deficit narrowing to $1.17 trillion from $1.75 trillion projected for this year.

Should the rally in equities be sustained, investors may begin shifting money into stocks from gold, some analysts said.

Susceptible to Equities

“Gold will be susceptible to the direction of equities,” said Tom Pawlicki, an analyst at MF Global Ltd. in Chicago.

Gold rose 6.4 percent last week when the S&P Index dropped 6.9 percent. Investment demand helped drive the price of gold to $1,007.70 on Feb. 20, the highest for a most-active contract since March 18. Gold reached a record $1,033.90 on March 17.

Investors may return should gold fall below $920, AltaVest’s Hartmann said.

“The public has been buying gold very steadily in ETFs and coins and that seems to have petered out,” Hartmann said. “A lot of buyers are waiting for a better price before coming back into the market.”

Silver futures for May delivery fell 93.5 cents, or 6.7 percent, to $12.975 an ounce in New York, the biggest percentage decline for a most-active contract since Dec. 1. The metal, up 28 percent this year at the end of last week, still has gained 15 percent since Dec. 31.

Silver ‘Hit Harder’

“Silver has been hit harder than gold simply because it has rallied more this year,” said Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisors in Cincinnati, who favors silver to gold. Silver fell 24 percent last year when gold rallied 5.5 percent.

Platinum futures for April delivery slipped $7, or 0.7 percent, to $1,052.10 an ounce on Nymex. Palladium futures for June delivery fell $3.05, or 1.5 percent, to $198.15 an ounce. Platinum is up 12 percent this year while palladium has gained 5 percent.