Gold at one-week low as dollar strengthens

YELLOW METAL WAS DOWN BY ABOUT 0.8% LAST WEEK

Gold eased for the second straight session to hit a one-week low yesterday as the dollar rose, putting the metal on track to post its biggest weekly fall in five ahead of the US Federal Reserve’s interest rate decision this week.

Spot gold was 0.3 per cent lower at $1,238.29 (Dh4,548) per ounce as of 1235 GMT. Earlier in the session, prices hit their lowest since December 6 at $1,236.80. The metal was down about 0.8 per cent last week.

US gold futures were down 0.4 per cent at $1,242.20 per ounce.

The dollar gained as investors turned nervous about an economic slowdown in China and was further supported by weakness in the euro and pound. A firm dollar makes gold more expensive for holders of other currencies.

“It seems to be a broader market sentiment as there is a drop across the precious complex ... The dollar has strengthened and that’s being reflected in gold’s downward movement,” said Capital Economics analyst Ross Strachan.

Markets are awaiting the Federal Open Market Committee (FOMC) meeting on December 18-19, where the US central bank is widely expected to raise interest rates for the fourth time this year.

“The more interesting aspect would be what the indications are from the Fed for their plans for 2019 as we’ve seen a shift in market expectations on how much tightening we might see next year, so comments leading to that situation would be keenly watched,” Strachan said.

Losing sheen

Gold has fallen around 9 per cent since April, hit by rising US interest rates and as investors chose the dollar as a safe haven rather than gold amid the US-China trade dispute.

Bullion is also on track to post an annual decline of about 5 per cent, after rising for the previous two years.

However, analysts are more optimistic on gold in 2019.

“We expect the rate of hikes to pause in second half of 2019, which may halt the dollar’s recent strength and support gold prices,” analysts at ANZ said in a note.

“We see gold as an important portfolio diversifier, amid rising equity volatility next year. The Fed’s pause in interest rate hikes, Brexit and other political risks, along with slowing economic growth should bode well for gold market.” Among other precious metals, spot palladium eased 1.2 per cent to $1,245.30 per ounce, having hit an alltime high of $1,269.25 in the previous session. The metal was on track for its third week of gains, with prices up about 1.2 per cent so far.

Silver fell 1.1

$14.60 per ounce.

Platinum was down 0.2 per cent at $791.50 per ounce, but was set to post a small weekly gain after declining for five weeks. per cent to