Gold slides to 5-1/2 month low on dol­lar

Kuwait Times - - BUSINESS -

LONDON: Gold hit its low­est level since late May on Fri­day as the dol­lar surged to a near 14-year high on ex­pec­ta­tions for a US rate hike next month and more in­fra­struc­ture spend­ing from the new Trump ad­min­is­tra­tion. The US cur­rency is on track for its best fort­night since 1988 ver­sus the yen, hav­ing hit its high­est since early 2003 ver­sus a cur­rency bas­ket as Don­ald Trump’s pres­i­den­tial win stoked talk of higher fis­cal spend­ing and tax cuts to jump-start the US econ­omy. That weighed on gold, which is priced in dol­lars. Spot gold slid to its low­est since May 30 at $1,203.52 an ounce, and was down 0.8 per­cent at $1,205.76 an ounce.

US gold fu­tures for De­cem­ber de­liv­ery were down $11.90 an ounce at $1,205.00, off a low of $1,201.30, its weak­est since mid-Fe­bru­ary. “It’s all about ex­pec­ta­tions, and what mar­kets ex­pect is a large fis­cal stim­u­lus, mostly in­fra­struc­ture spend­ing, and for the Fed­eral Re­serve to be much more ag­gres­sive in hik­ing rates,” Cap­i­tal Eco­nom­ics an­a­lyst Si­mona Gam­barini said.

“That’s what’s be­ing re­flected in the (gold) price.” Spot prices have fallen nearly 2 per­cent this week and are more than $130 an ounce down from their post-elec­tion peak, hurt by the jump in the dol­lar and a surge in US Trea­sury yields.

US bond yields were set for the big­gest fort­nightly rise in 15 years yes­ter­day on bets US in­fla­tion and in­ter­est rates are headed higher. That in­creased the op­por­tu­nity cost of hold­ing non-yield­ing bul­lion. Fed chair Janet Yellen said on Thurs­day in con­gres­sional tes­ti­mony that Trump’s elec­tion has done noth­ing to change the Fed’s plans for a rate in­crease “rel­a­tively soon”.

Hold­ings of the world’s largest gold-backed ex­change-traded fund, SPDR Gold Shares, fell another 5.6 tons on Thurs­day to their low­est since June. Hold­ings have fallen nearly 30 tons since the US elec­tion. “With the pres­sure that has been seen in gold prices since early Novem­ber, to­tal ETF hold­ings in gold have fallen to their low­est level since early July 2016,” ING said in a note. “Fur­ther out­flows could put fur­ther pres­sure on gold prices.” Sil­ver was down 1.1 per­cent at $16.47 an ounce, hav­ing ear­lier touched its low­est since June 8 at $16.44, while plat­inum was 0.5 per­cent lower at $925.80. Both met­als were set for a sec­ond con­sec­u­tive weekly de­cline. Pal­la­dium was down 1.9 per­cent at $713 an ounce, but was set to post a third weekly rise, of more than 6 per­cent. The metal has ben­e­fited from strength in in­dus­trial met­als, on hopes that higher US in­fra­struc­ture spend­ing could boost de­mand.

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