Gold falls as the greenback strengthens; terror attacks fail to support

NEW YORK/LONDON — Gold fell on Tuesday 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 0.70% at $ 1,131.18 an ounce by 2: 51 p. m. EST (1951 GMT), after hitting a session low at $1,125.23, not far from last week’s 10- and- a- halfmonth low of $1,122.35, its lowest since early February. US gold futures settled down 0.8% at $1,133.60.

Gold prices came off their session lows as the US dollar pared gains from 14-year highs. The greenback was buoyed by comments from Federal Reserve Chair Janet Yellen that reinforced expectations for a faster pace of US interest rate increases next year than had been expected.

“Chair of the Fed Yellen yesterday reinforced Fed rate hike plans and headwinds persist for gold holders for now,” said George Gero, managing director at RBC Wealth Management.

“It’s all about the dollar as usual; also higher bond yields are not only anti-inflationary but competitive to gold holders.”

Rising US rates could mean further gains for the US currency, which when it rises makes dollardenominated commodities more expensive for holders of other currencies.

Higher US Treasury yields mean it is cheaper for investors to buy US government bonds, which like gold are seen as risk-free.

But unlike gold which earns nothing and costs to insure and store, Treasuries earn regular coupons.

“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,” said Societe Generale Analyst Robin Bhar.

Investor confidence in the global economy is reflected in holdings of the SPDR Gold Trust, the world’s largest gold- backed exchange- traded fund, which at 26.624 million ounces on are down more than 13% since Nov. 9.

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. “Despite attractive price levels, consumers in India have stayed away. This suggests to us that the gold market faces a fragile floor,” Standard Chartered analysts said in a note.

Among other precious metals, silver turned up 0.30% at $16.02 an ounce after tapping $15.59, its lowest since April. Platinum also turned higher and was up 0.20% at $ 918.40. But palladium lost 1.80% at $664.75 an ounce after reaching $660.97, its lowest since Nov. 9. —