Gold prices decreased by 0.9 percent to about $1,234.80 per ounce.
The demand for gold is split between physical demand, mostly for jewelry or a few industrial processes, and hedging or diversification demand, where investors hold gold in the hopes that it will retain its value where other investments like bonds, equities and conventional currencies do not. Gold is also perceived as a hedge against inflation.
“The physical market is unlikely to provide much support for gold over the summer months, typically the seasonally weakest for jewelry demand,” said the Royal Bank of Scotland in an interview with Bloomberg.
Elsewhere, silver futures also fell by about one percent. Goldcore Dublin Ltd., a bullion dealer, said that it might be undervalued compared to gold. Silver futures are up around 8.5 percent from the beginning of the year, as compared to 12.5 percent for gold futures. It remains unclear whether the retreating price of these precious metals is due to profit-taking by traders, a perception that stock markets are recovering, or other factors.
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