Gold de­clines as dol­lar rises, in­vestors re­treat

Kuwait Times - - BUSINESS -

Gold fell yes­ter­day as the dol­lar rose and in­vestors sold on ex­pec­ta­tions of stronger global eco­nomic growth and higher US in­ter­est rates, while deadly in­ci­dents in Turkey and Ger­many failed to spur safe-haven buy­ing.

Spot gold was down 0.4 per­cent to $1,133.25 an ounce at 1114 GMT. Last week it fell to $1,122.35, its low­est since early Fe­bru­ary. US gold fu­tures slipped 0.6 per­cent to $1,135.30 per ounce.

The dol­lar was trad­ing near 14-year highs af­ter Fed­eral Re­serve Chair Janet Yellen re­in­forced ex­pec­ta­tions for a faster pace of US in­ter­est rate rises next year than had been ex­pected.

Higher US rates could mean fur­ther gains for the US cur­rency, which when it rises makes dol­lar-de­nom­i­nated com­modi­ties more ex­pen­sive for hold­ers of other cur­ren­cies.

“A strength­en­ing US and global econ­omy, the dol­lar go­ing up, higher eq­ui­ties and ris­ing US bond yields are neg­a­tive for gold,” said So­ci­ete Gen­erale an­a­lyst Robin Bhar.

“The Fed was more hawk­ish than we ex­pected ... But it is sur­pris­ing not to see some safe-haven buy­ing af­ter the events in Ber­lin and Turkey.”

Higher US Trea­sury yields mean it’s cheaper for in­vestors to buy US gov­ern­ment Trea­suries, which like gold are seen as risk-free. But un­like gold which earns noth­ing and costs to in­sure and store, Trea­suries earn reg­u­lar coupons. In­vestor con­fi­dence in the global econ­omy can be seen in hold­ings of the SPDR Gold Trust, the world’s largest gold-backed ex­change-traded fund, which at 828.10 tonnes on Mon­day is down more than 13 per­cent since Nov. 9.

Traders say some profit-tak­ing on short po­si­tions could see gold re­cover over the next few days, but they ex­pect any gains to be lim­ited and short-lived.

Also weigh­ing on gold is the prospect of weaker phys­i­cal de­mand in top con­sumer In­dia where re­tail de­mand has fal­tered due to the gov­ern­ment’s move to scrap high-value cur­rency notes. — Reuters

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