Gold Falls as Stocks Rally Worldwide, Demand Ebbs; Silver Drops

March 16 (Bloomberg) -- Gold fell as an equity rally worldwide reduced the appeal of the precious metal as an alternative investment. Silver also declined.

Equity indexes climbed in Asia and Europe, and U.S. stocks headed higher after posting the biggest weekly gain since November. Investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, rose 2.7 percent last week to a record 1,056.8 metric tons.

“We have a rally in the equity markets, so gold is backing and filling,” said Marty McNeill, a trader at R.F. Lafferty Inc. in New York. “Each time stocks rally, some of the money goes out of gold and goes into equities.”

Gold futures for April delivery fell $8.10, or 0.9 percent, to $922 an ounce on the New York Mercantile Exchange’s Comex division. The metal still has gained 4.3 percent this year.

Silver futures for May delivery dropped 32.5 cents, or 2.5 percent, to $12.89 an ounce on Comex. The metal is still up 14 percent this year.

Demand for haven assets such as gold and U.S. Treasury debt may ease as equity markets stabilize and the economy improves, some analysts said.

“It’s too soon to say the equity rally is over,” said Tom Hartmann, commodity analyst at AltaVest Worldwide Trading Inc. in Mission Viejo, California. “Going sideways is better than dropping.”

Treasuries Falling

Last year, when the Standard & Poor’s 500 Index of U.S. equities fell 38 percent, Treasuries returned 14 percent and gold prices increased 5.5 percent. Treasuries were down 2.8 percent this year through March 13, according to Merrill Lynch & Co. bond indexes.

Still, some investors may prefer gold to currencies after the Swiss National Bank said last week it was selling the franc and Wen Jiabao, the premier of China, said he is “worried” about his country’s investment in U.S. debt. China held $739.6 billion in treasuries as of Jan. 31, Bloomberg data show.

“Anyone who holds government debt should be worried,” said James Turk, the founder of GoldMoney.com, which had $608 million of gold and silver in storage for investors at the end of February. “The decline in the price of Treasuries over the past few months is evidence of this flow out of Treasuries into physical gold.”

The SPDR Gold Trust’s holdings of the metal have grown 35 percent this year.