Gold rout deepens after Yellen remarks
SILVER AND PLATINUM REACH LOWEST SINCE AT LEAST 2009
Gold extended its drop to a five-year low after Federal Reserve Chair Janet Yellen said the US economy is ready for higher interest rates and investors sold the most through bullion-backed funds in more than two years.
Silver and platinum reached the lowest since at least 2009 as the prospect of the first increase in US rates in almost a decade cut demand for precious metals, which don’t pay interest like some other assets. Yellen said Wednesday that waiting too long to end the era of near-zeroborrowing costs could force the central bank to tighten too quickly, which would risk disrupting markets.
“It’s almost a certainty that the Fed is going to raise rates,” said Barnabas Gan, an economist at Singapore-based Oversea-Chinese Banking Corp, and the most accurate gold forecaster tracked by Bloomberg in the third quarter. “Higher interest rates will spell a stronger dollar and the stronger dollar will spell weaker gold prices.”
Investors accelerated sales from gold exchange-traded products. Global holdings dropped 16.2 metric tonnes, the most since July 2013, to 1,473.5 tons as of Wednesday, data compiled by Bloomberg show. Assets in the SPDR Gold Trust, the largest bullion fund, slid the most in almost five years.
Price
Bullion for immediate delivery lost as much as 0.7 per cent to $1,046.44 an ounce, the lowest since February 2010, and was at $1,050.93 by 11:32am in London, according to Bloomberg generic pricing.
There’s a 74 per cent chance the Fed will increase rates at its December 15-16 meeting, futures show. A report Wednesday from ADP Research Institute showed US companies added more workers in November than forecast. The Labour Department will release its monthly jobs report today.
“It’s a US dollar and US rates story at the moment,” Georgette Boele, an Amsterdambased strategist at ABN Amro Bank NV, said by email. today’s payroll data “is crucial,” she said.
Gold typically moves in the opposite direction to the dollar, which climbed to the highest since April against the euro as investors braced for a longawaited boost to monetary stimulus at yesterday’s European Central Bank meeting.
Silver fell as much as 1.2 per cent to $13.8423 an ounce, the lowest since August 2009. Platinum was little changed after dropping as much as 0.9 per cent to the weakest level since December 2008. Palladium rose 0.4 per cent.