Gold pressured by firm dollar, vulnerable to downside
Gold was barely changed yesterday, but some analysts say there is scope for further downside after bullion endured its worst month of losses since June 2013. Gold has shed about 7 percent in November and analyst Daniel Briesemann at Commerzbank in Frankfurt reckons that bullion has not yet stabilized. “Recently there’s been a perfect storm against gold with higher risk appetite, rising stock markets and bond yields, massive ETF (exchange traded fund) outflows and the withdrawal of speculative financial investors,” he said.
“We don’t think this is over yet. Normally lower prices should attract higher demand, but the Indian situation is putting the brakes on gold buying.” The shock withdrawal of high-value notes to fight “black money” in India, the world’s second biggest consumer of gold, has hit gold demand during the peak wedding season. Spot gold yesterday was down 0.1 percent at $1,187.67 an ounce at 1100 GMT. US gold futures fell 0.1 percent to $1,186.70.
Bullion has lost $150 from a Nov 9 post US election high of $1,337.40 per ounce, hurt by a rally in the US dollar on surging Treasury yields as investors believed President-elect Donald Trump’s policies would invoke faster inflation. “Markets seem to accept Trump as good for business,” said Joshua Rotbart, managing partner at Hong Kong-based bullion services provider J Rotbart & Co.
An expected US interest rate hike by the Federal Reserve in December has also been pressuring gold. 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. The dollar hit its highest level against a basket of major currencies for almost 14 years last week and was slightly firmer yesterday as US debt yields resumed their ascent. Oil surged yesterday on prospects for an OPEC output cut to curb oversupply.
“The impact of an OPEC deal on gold would be tricky to assess,” said Edward Meir, an analyst with INTL FCStone. “A failure by OPEC to agree on a credible cut will send oil prices sharply lower and possibly drag gold down with it. However, we could see the dollar weaken as a result of oil selling off and this could boost gold,” Meir said. Silver rose 0.4 percent to $16.66 an ounce while platinum added 0.1 percent at $918.49. Palladium climbed to an intraday high of $772.70 an ounce, its strongest since June 2015, paring gains to $766.72, up 0.9 percent. Palladium has risen over 23 percent this month, its best since February 2008, outperforming other metals. — Reuters