Gold futures have fallen to their lowest level in nearly three weeks as investors shed holdings of the precious metal in favour of riskier assets like equities.
The most actively traded contract, for February delivery, fell $US13.30, or 0.8 per cent, to settle at $US1,656.60 a troy ounce on the Comex division of the New York Mercantile Exchange. This was the lowest settlement price since $US1,655.50 a troy ounce on January 9.
The rally in US equities continued to siphon capital out of precious metals as investors grew more comfortable with the riskier assets. The Standard & Poor's 500 stocks index was recently trading at 1502, up seven points, or 0.5 per cent.
Gold is widely considered a haven asset, with investors flocking to the yellow metal during times of sovereign and financial crisis. However, recent improvement in US economic data and the stronger performance of risky assets like stocks have turned some investors away from gold.
Adding to the downbeat tone, Citi has downgraded its gold forecast for 2013. The bank now expects gold prices to average $US1,675 a troy ounce this year, down from a previous forecast of $US1,750.
Citi analysts said the downgrade comes amid expectations the US dollar will continue to strengthen, a trend that tends to weaken interest in US dollar-denominated gold among investors who hold other currencies.
China's state news agency Xinhua said the China Securities Regulatory Commission issued rules on physical-gold-backed exchange traded funds, paving the way for gold ETFs to be listed on domestic exchanges. China is the world's largest gold producer and is second behind India in global consumption of the precious metal.
The launch of gold ETFs in China could attract "substantial" capital, said Tom Kendall, director of research at Credit Suisse, in a report.
However, management fees, entry and exit fees and tax treatment relative to other gold investment products will play a central role in deciding whether investors take up the products, because Chinese investors already have "numerous low-cost avenues to get exposure to the physical metal," he said.
Settlements (ranges include open-outcry and electronic trading):
London PM Gold Fix: $1,660.00; previous PM $1,671.00
Feb gold $1,656.60, down $13.30; Range $1,655.00-$1,671.60
May silver $31.206, down 51.6 cents; Range $31.125-$31.815
Apr platinum $1,694.90, up $11.10; Range $1,675.00-$1,695.80
Mar palladium $741.00, up $14.30; Range $723.10-$741.90