Gold set for rare losses as meta'ls popularity dims

London - For the first time in seven years, gold has fared poorly in August.

Metal for immediate delivery dropped 2.2% this month as the Federal Reserve moved closer to raising interest rates and bullion purchases for exchange-traded funds slowed.

The loss is unusual because, even as prices plunged during the past five years, gold always rose during August as dealers stocked up on jewellery ahead of India’s wedding and festival season. Now, the market is losing momentum after a tremendous rally earlier this year.

The metal gained 25% in the first six months of this year, the best first half in 40 years.

"The odds of the US raising the interest rate has taken some steam out of the metal," Naeem Aslam, chief market analyst at Think Markets UK in London, said by e-mail.

"A hike has now been priced in. What is more important is the pace of tightening."

Gold slipped 0.3% to $1 319.84 an ounce as of 12:22 p.m. in London. Prices have fallen seven of the past eight days.

In the decade to 2015, bullion added 2.2% on average during August, the best month after January.

Another bearish sign for gold: central banks, the biggest owners of the metal, cut their purchases by 40% in the second quarter compared with the same period a year earlier to the lowest since 2011, according to World Gold Council figures.

Emerging-market nations have been adding less gold as the amount of cash they get from exports declined, said John Nugee, a manager of Bank of England reserves in the 1990s.

Gold mining stocks retreated in London trading. Hochschild Mining, a Peruvian producer, and Acacia Mining, which mines for the metal in Tanzania, slid more than 6%.

Citigroup analysts cut their six-month stance on the global metals and mining industry to bearish, citing concern that recent gains are unlikely to continue.

In other metals news:

Holdings in bullion-backed exchange traded funds added 0.4 metric tonne to 2 032.6 tonnes, according to data compiled by Bloomberg as of Monday. Spot silver lost 0.8% to $18.735 an ounce.

Prices are down 7.9% for the month. Platinum little changed at $1 077.13 an ounce. The metal slid 6.3% in August. Palladium fell 0.5% to $696.07 an ounce, set for a 2% retreat this month.