Gold slid more than 1 percent to its lowest since early 2010 on Friday, on course for its biggest weekly loss in nine months, as upbeat U.S.jobs data helped deepen this week’s rout and fuelled fears the metal still has some way to fall.
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Gold has been dragged down by expectations the Federal Reserve will raise interest rates later this year as the US economy recovers. Gold futures in New York are heading for their longest losing streak since 1996 amid increasing speculation U.S. interest rates will climb this year, weakening the appeal of bullion. The prospect of higher interest rates will probably boost the dollar and may cause gold prices to drop toward $1,050 an ounce, he said.
Gold tumbled as much as 4 per cent on Monday in a sell-off exacerbated by big trading volumes on the Shanghai Gold Exchange after investors dumped more than US$500 million of bullion in New York in seconds during early Asian trading hours. From a technical perspective gold remains under pressure.
“With major gold miners struggling to replace reserves, production may begin to decline and higher prices will be required to justify the next round of large capital expenditures”.
By Xavier BrennerA few years ago, gold bugs argued the precious metal was a can’t-miss investment given the ultra-loose monetary policies around the world and the prospect of higher inflation. “As such, the current gold price at below $1,100 per ounce is likely reflective of a pricing-in effect should the Fed eventually hike in September”, he pointed out. “If you liked it at $1,200, you have to love it at $1,095”, said James Cordier, president of OptionSellers.com.
“The technical picture looks pretty bad and U.S. data has been stronger than expected”. Silver also showed some signs of recovery and gathered Rs 230 to settle at Rs 34,330 per kg on scattered demand from consuming industries. “With gold prices going down, people are making small purchases”, said G V Sreedhar, vice chairman, All India Gems and Jewellery Trade Federation (GJF).
Gold’s decline picked up momentum after the US dollar moved into positive territory against a basket of currencies.
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Bullion dipped to $1,086.2 Monday, and Jeffrey Currie, Goldman Sachs’ head of commodities research, warned that prices could fall below $1,000 per ounce for the first time since 2009, reports Swansy Afonso for Bloomberg.
