Gold to snap los­ing streak

Kuwait Times - - BUSINESS -

LON­DON:

Gold hit a two-week high yes­ter­day on a weaker dol­lar and was set to close 2016 more than 9 per­cent higher, snap­ping three years of de­clines. Spot gold was up 0.1 per­cent at $1,158.86 an ounce by 1159 GMT, hav­ing hit its high­est since Dec. 14 at $1,163.14. US gold fu­tures rose $2.60 to $1,160.70 an ounce.

In the first half of 2016, in­vestors in­creased gold ex­po­sure as the Fed­eral Reserve showed cau­tion on rais­ing in­ter­est rates due to con­cerns about global growth, while Bri­tain’s vote to leave the Euro­pean Union curbed ap­petite for risk and pushed the metal to a two-year high in July. But gold prices fell more than 8 per­cent in Novem­ber, on higher US Trea­sury yields af­ter Don­ald Trump’s elec­tion win led to spec­u­la­tion his com­mit­ment to in­fra­struc­ture spend­ing would spur growth.

Bul­lion then hit a 10-month low on Dec 15 as solid US eco­nomic data gave the Fed the con­fi­dence to raise rates for the first time in a year. The cen­tral bank sig­naled three more in­creases next year from the pre­vi­ous pro­jec­tion of two. “In 2017, we could see more weak­ness in the gold price be­cause of the three pro­jected rate in­creases by the Fed, which would lead to a stronger dol­lar,” said Peter Fer­tig, owner of Quan­ti­ta­tive Com­mod­ity Re­search.

Po­lit­i­cal al­liances

“On the other hand, though, un­cer­tainty about po­lit­i­cal al­liances be­tween US Pres­i­dent-elect Trump and in­ter­na­tional play­ers could cre­ate some geopo­lit­i­cal frac­tures, which would be pos­i­tive for gold.” The pre­cious metal is of­ten seen as a hedge against geopo­lit­i­cal risks. The dol­lar, which was down 0.5 per­cent against a bas­ket of six cur­ren­cies, and US Trea­sury yields will re­main a key driver for gold’s move­ments, an­a­lysts said.

Re­turns from US bonds are closely watched by the gold mar­ket, given that the metal pays no in­ter­est. Other pre­cious met­als were also set to end the year in pos­i­tive ter­ri­tory, with pal­la­dium the best per­former, up more than 19 per­cent so far in 2016. It was un­changed at $671.84 an ounce. Plat­inum gained 0.4 per­cent to $901, head­ing for a yearly rise of just over 1 per­cent, its first an­nual gain in four years.

The spread be­tween plat­inum and pal­la­dium con­tracted to its nar­row­est in nearly 15 years ear­lier this month at $141 an ounce, as pal­la­dium, mostly used in au­to­cat­a­lysts, ben­e­fited from higher car de­mand in China and the United States and dwin­dling sup­ply. “A sharply widen­ing deficit ... is likely to pro­pel pal­la­dium higher as scope for mine out­put re­mains lim­ited and in­dus­trial and auto de­mand firm,” HSBC said in a note. Sil­ver, up 0.2 per­cent at $16.18, was on track to end the year 17 per­cent higher. — Reuters

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