Gold slides as mar­ket looks to Fed rate rise

In­vestors fa­vor risk as­sets such as eq­ui­ties

Kuwait Times - - BUSINESS -

Gold prices fell yes­ter­day due to ex­pec­ta­tions of rising US in­ter­est rates and a higher dol­lar and im­prov­ing sen­ti­ment for global eco­nomic growth, which means in­vestors are likely to fa­vor risk as­sets such as eq­ui­ties. Spot gold was down 0.5 per­cent at $1,187.4 an ounce as of 1036 GMT. US gold fu­tures slid 0.5 to $1,185.9 per ounce. The US Fed­eral Re­serve is seen rais­ing rates in De­cem­ber and boost­ing the US cur­rency, which when it rises makes com­modi­ties more ex­pen­sive for non-US buy­ers. The dol­lar in­dex, which tracks the green­back against a bas­ket of six ma­jor ri­vals, hit a nearly 14-year peak of 102.050 last week.

“Gold is strug­gling here with the higher dol­lar and bet­ter sen­ti­ment for growth,” said Danske Bank an­a­lyst Jens Ped­er­son. “Rising bond yields means it’s cheaper to buy US Trea­suries, which, like gold, are viewed as a risk-free as­set.” How­ever, gov­ern­ment bonds, un­like gold, earn in­ter­est. Ex­pec­ta­tions of stronger growth af­ter US Pres­i­dent-elect Don­ald Trump takes of­fice in Jan­uary have also helped equity mar­kets since the elec­tion ear­lier this month. “Af­ter the elec­tion peo­ple are think­ing we’re go­ing to get a few more years of growth and stronger eq­ui­ties,” said An­drew Cole, a fund man­ager at Pictet As­set Man­age­ment. “Gold’s losses are not sur­pris­ing given the dol­lar.”

An­a­lysts said doubts about whether Ital­ian Prime Min­is­ter Mat­teo Renzi will win a ref­er­en­dum on Sun­day on con­sti­tu­tional re­form have not, as some had ex­pected, coun­tered neg­a­tive sen­ti­ment to­wards gold. But the Ital­ian vote and Aus­tria’s pres­i­den­tial elec­tion also on Sun­day can­not be ig­nored. On the tech­ni­cal front, traders say a break of a Fi­bonacci sup­port level at $1,171.76 last week means gold could see lower lev­els over com­ing weeks. “The trig­ger could be higher US rates,” one trader said. “What the Fed says about the tim­ing of fur­ther rises will also be im­por­tant for gold.” Sil­ver fell 0.5 per­cent to $16.54 an ounce, while plat­inum lost 0.1 per­cent to $921.85. Pal­la­dium gained 0.1 per­cent to $756.0 af­ter rising to its high­est since June 4, 2015, at $760.30 on Mon­day. — Reuters

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