Gold dips to near 6yr low, set for 6th straight weekly drop
LONDON: Gold dipped to its lowest level in nearly six years yesterday and was heading for a sixth straight weekly decline under pressure from a firm dollar and prospects of a US interest rate rise next month. Spot gold hit $1,055.99 an ounce, its lowest since February 2010, and was down 1.5 percent at $1,057.27 by 1314 GMT.
The metal was down 1.9 percent for the week. US gold futures also fell 1.3 percent to $1,055.90 an ounce and were also headed for a sixth consecutive weekly decline. Gold was undermined by a firm dollar, trading near an eight-month high against a basket of major currencies, mostly boosted by euro and Swiss franc weakness. The dollar-denominated metal becomes more expensive for foreign investors when the US currency rises.
“The dollar is bid and you have the inverse relationship with gold simply because the Fed is going to be tightening,” Societe Generale analyst Robin Bhar said.
“The omens are not positive for gold in the lead-up to the December rate meeting.” The Federal Reserve is widely expected to raise US rates for the first time in nearly a decade when it meets next on Dec. 15-16. Higher rates would rise the opportunity cost of holding non-yielding gold and could dent demand and boost the dollar. “Once again, gold is unable to find a bid. Any small rally that we see is being sold into,” said a Sydney-based precious metals trader. Buying in China has been good but has been unable to support prices, the trader said. Premiums on the Shanghai Gold Exchange, a proxy for demand in China, were trading at $5-$6 an ounce, versus $3-$4 at the beginning of the month. — Reuters