Gold Falls as Improved Outlook for U.S. Economy May Curb Demand

April 14 (Bloomberg) -- Gold fell in New York on speculation that the U.S. economy will rebound, eroding the appeal of the precious metal as an alternative asset. Silver was little changed.

Federal Reserve Chairman Ben S. Bernanke said there are signs that the “sharp decline” in the economy may be easing, and President Barack Obama said the stimulus package is beginning to “generate economic progress.” Before today, investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, had risen 45 percent this year to a record as investors sought a haven from financial turmoil.

“There are signs of a sentiment change that may boost risk appetite and equity markets at the expense of debt and safe- haven markets,” said Tom Pawlicki, an MF Global Ltd. analyst in Chicago. “This tug-of-war will be decided by fresh money coming from the sidelines which will choose risk markets over safe havens.”

Gold futures for June delivery fell $3.80, or 0.4 percent, to $892 an ounce on the New York Mercantile Exchange’s Comex division. The metal has risen 0.9 percent this year. Silver futures for May delivery fell 0.3 cent to $12.765 an ounce in New York. Silver has gained 13 percent this year.

For gold prices to remain high, investment demand must not stall, analysts at Societe Generale said today in a report.

Exchange-Traded Fund

Bullion held in the SPDR Gold ETF was unchanged at a record 1,127.68 metric tons for a second day.

“If buying momentum is not re-ignited, and there is a case for suggesting the major surge is out of the way, then prices will come down,” Societe Generale said.

Gold rose to $1,007.70 an ounce on Feb. 20, the highest price this year. The most-active contract touched a record $1,033.90 on March 17, 2008. Societe Generale expects gold to average $750 in this year’s fourth quarter.

Gold’s losses were limited after a report showed U.S. retail sales fell 1.1 percent in March from February. The median estimate of 73 economists surveyed by Bloomberg News was for a 0.3 percent gain. Retail sales rose 0.3 percent in February, the government said, revising an earlier estimate of a 0.1 percent decline.

U.S. equity indexes retreated while shares in Europe rose. The Standard & Poor’s 500 Index slumped as much as 2.2 percent after five straight weekly gains.