Gold hits 5-m low

Kuwait Times - - BUSINESS -

LON­DON: Gold prices fell to their lowest in over five months yes­ter­day, hit by a broad sell-off in com­modi­ties as well as surg­ing bond yields on spec­u­la­tion a splurge of US in­fras­truc­ture spend­ing could stoke in­fla­tion. Spot gold fell 2.2 per­cent to $1,231.79 an ounce by 1515 GMT af­ter touch­ing a ses­sion low of $1,229.04, the weak­est since June 3. It has shed over 5 per­cent so far this week. US gold fu­tures fell 2.6 per­cent to $1,234.50 per ounce af­ter fall­ing to $1,228.50, the weak­est since June 3.

“There’s a broad based com­mod­ity sell-off. Cop­per and nickel are get­ting hit and it’s spilled over into pre­cious,” a Euro­pean trader said. Gold was al­ready slightly weaker be­fore base me­tals re­versed and went into neg­a­tive ter­ri­tory af­ter a siz­zling rally, while oil ex­tended losses. “We’re see­ing a com­plete re­assess­ment of var­i­ous as­set classes fol­low­ing the Trump win ear­lier this week. The com­bi­na­tion of ris­ing real yields and the stronger dol­lar is re­ally hurt­ing sen­ti­ment in gold,” said Ole Hansen, head of com­mod­ity strat­egy at Saxo Bank in Copen­hagen.

The dol­lar was on course for its best week in a year, driven by ex­pec­ta­tions of ris­ing US in­fla­tion if Pres­i­den­t­elect Don­ald Trump de­liv­ers on prom­ises to boost pub­lic spend­ing and put bar­ri­ers on cheap im­ports. The mar­ket is also bet­ting on the Fed­eral Re­serve rais­ing in­ter­est rates more quickly. Gold is highly sen­si­tive to ris­ing rates, which lift the op­por­tu­nity cost of hold­ing non-yield­ing as­sets such as bul­lion, while boost­ing the dol­lar, in which it is priced.

But the weak­ness in gold may be short-lived, Com­modi­ties Econ­o­mist Si­mona Gam­barini at Cap­i­tal Eco­nom­ics said in a note. “The eu­pho­ria about in­fras­truc­ture spend­ing could soon be re­placed by con­cerns about a trade war and geopo­lit­i­cal risks, restor­ing the safe­haven bid for gold.” In Asian trad­ing, gold had been sup­ported on the down­side by phys­i­cal buy­ing.

Gold premi­ums in In­dia jumped to their high­est in 21 months, as de­mand surged af­ter the gov­ern­ment abol­ished two high-value cur­rency notes, while bar­gain hunt­ing propped up de­mand and premi­ums in lead­ing con­sumer China.

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