Gold slips on rate hike views but pal­la­dium rises

Business World - - World Markets -

GOLD slipped on Wed­nes­day on ex­pec­ta­tions of more in­ter­est rate hikes fol­low­ing re­marks from a US Fed­eral Re­serve of­fi­cial and as some in­vestors booked prof­its af­ter prices hit their high­est in more than five weeks.

Pal­la­dium, on the other hand, sur­passed the bul­lion for the first time in about 16 years, to hit a new record high of $1,263.56 per ounce as higher spec­u­la­tive in­ter­est and larger sup­ply deficit boosted the auto-cat­a­lyst metal.

Spot gold was down 0.2% at $1,236.11 per ounce at 13:45 p.m. EST (1845 GMT). US gold fu­tures down $4 or 0.3% at $1,242.60.

“It’s just the lack of in­ter­est in gold at the mo­ment. Most of the in­ter­est is in the bond mar­ket,” said Wal­ter Pe­howich, ex­ec­u­tive vice-pres­i­dent of in­vest­ment ser­vices at Dil­lon Gage Me­tals, adding that in­vestors were also lock­ing in prof­its af­ter Tues­day’s gains.

Gold rose to its high­est since Oct. 26 at $1,241.86 on Tues­day, helped by a softer dol­lar which has been pres­sured by con­cerns about weaker growth and bets that the US Fed­eral Re­serve would end its tight­en­ing cam­paign sooner than pre­vi­ously thought.

Fed Chair­man Jerome Pow­ell last Wed­nes­day said US in­ter­est rates were near­ing neu­tral lev­els, which mar­kets in­ter­preted that the cen­tral bank would slow­down the pace of rate hikes.

How­ever, New York Fed Pres­i­dent John Wil­liams on Tues­day said the cen­tral bank should ex­pect to con­tinue rais­ing in­ter­est rates “over the next year or so” even while it pays close at­ten­tion to pos­si­ble risks high­lighted by fi­nan­cial mar­kets.

“He is con­tra­dict­ing the Fed chair­man. That caused some down­ward pres­sure on the metal,” Mr. Pe­howich said.

The cen­tral bank is widely ex­pected to raise rates at its pol­icy meet­ing on Dec. 18-19 and in­vestors are keep­ing a close eye on sig­nals for the fu­ture path of in­ter­est rates next year.

“As long as the end of Fed in­ter­est rate hikes is still open, the gold price is likely to suf­fer re­peated tem­po­rary set­backs,” Com­merzbank an­a­lysts said in a note.

Higher in­ter­est rates in­crease the op­por­tu­nity cost of hold­ing the non-yield­ing bul­lion. Gold prices have fallen about nine per­cent from a peak in April when prices were trad­ing around $1,365 per ounce.

“The lat­est po­si­tion­ing data from the fu­tures mar­ket show that there are ex­tremely large spec­u­la­tive short po­si­tions in gold… This shows that spec­u­la­tors have lit­tle faith in the up­side po­ten­tial for gold prices,” ABN AMRO an­a­lyst Ge­or­gette Boele said in a note.

Plat­inum was down one per­cent at $795.80 per ounce af­ter hit­ting at $785, its low­est since Sept. 12, ear­lier in the ses­sion.

Spot silver fell 0.4% to $14.46 per ounce. —

REUTERS

PAL­LA­DIUM in­gots are pre­pared for weigh­ing and pack­ag­ing in a room at the Krastsvet­met plant in the Siberian City of Kras­no­yarsk, Nov. 16, 2009.

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