Gold Falls in New York as Demand for Haven Wanes; Silver Drops

April 6 (Bloomberg) -- Gold fell to the lowest price in more than two months, erasing this year’s gains, on speculation that the U.S. economy will rebound, eroding the precious metal’s appeal as a haven. Silver dropped the most in two weeks.

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, fell for the first time in two weeks as a month-long rally in equities curbed demand for safety assets. Before today, the Standard & Poor’s 500 Index had rallied 23 percent since March 6 while gold dropped 4.8 percent.

“People don’t think they need that flight-to-quality buying and that’s putting gold into the background,” said Stephen Platt, a commodity analyst at Archer Financial Services Inc. in Chicago.

Gold futures for June delivery fell $24.50, or 2.7 percent, to $872.80 an ounce on the Comex division of the New York Mercantile Exchange. The price earlier reached $865, the lowest for a most-active contract since Jan. 23.

Today’s decline left gold down 1.3 percent this year, after posting annual gains every year since 2001.

Silver futures for May delivery declined 62.5 cents, or 4.9 percent, to $12.11 an ounce, the biggest percentage drop since March 18. Silver is still up 7.2 percent this year.

The Federal Reserve began buying Treasuries maturing between 10 years and 17 years from now to reduce consumer- lending rates and ease the recession. Fed Chairman Ben S. Bernanke said on April 3 that the central bank’s efforts to unfreeze credit are working, including an earlier reduction of the benchmark interest rate to near zero.

“People are feeling more comfortable about economic prospects,” Platt said.

Gold Trust

Stocks in the U.S. and Europe fell while equities in Asia rallied. The amount of bullion held by the SPDR Gold Trust declined 1,107 ounces to 1,127.37 metric tons on April 3. Before the decline, assets were unchanged at a record 1,127.44 tons reached on March 27. The fund is still up 44 percent this year.

Gold’s losses accelerated after the price closed below $900 on April 3, analysts said.

“Those not out of gold should use any bounce back toward $894 to exit the trade and focus their energies elsewhere,” said Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter.

Lower gold prices may attract buyers from India, some analysts said. Imports by India, the biggest buyer of the precious metal, had been near zero in the past two months, according to the Bombay Bullion Association Ltd.

“Gold, at the new price equation, found buyers in India for a change,” said Jon Nadler, analyst at Kitco Inc. in Montreal.