Gold fell to the lowest in more than five years on Monday, extending a fourth week of losses, amid the prospects of the first interest rate hike in the USA in nearly a decade and after China reported smaller inventories of the precious metal than analysts expected.
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Spot gold fell US$45.55 to its weakest since March 2010 at US$1,088.05 an ounce shortly after the Shanghai Gold Exchange opened, with volumes soaring to a record.
China said on Friday its gold reserves were up 57 percent at the end of June from the last time it adjusted its reserve figures more than six years ago.
The move follows a sharp drop in gold prices in US trading on Friday, when gold settled at its lowest in more than five years on Comex.
“Rate remained at Rs 24,390 per 10gm in the local market, same as on previous two days after declining from Rs 24,450 on Friday and Rs 24,740 on July 12 due to lower demand and negative sentiment”, Venugopala Shetty, proprietor of Ganesha Jewellers, told IANS in Bengaluru. Silver, often considered a cheaper alternative to gold, has been beaten down and traded 0.3% lower, while platinum and palladium declined 1.8% and 1.5%, respectively.
The fall in the gold price was triggered by comments made last week by chairman of the Federal Reserve Janet Yellen suggesting United States rates are likely to rise by the end of the year.
Why? Because gold is a store of wealth for investors, but generates no returns from regular interest payments or dividend income.
A desire to dump gold appeared to have been exacerbated by a perception that concerns about the Greek economy and the volatile Chinese stock markets have somewhat eased. The greenback was steady at US$1.0825 per euro after climbing the most since May versus the common currency last week. “And the reason for that is because, currently, the price level is heavily driven by the futures market and not the physical market”, said Chua. “The key ones being a strong dollar and a possibility of an interest rate hike by the Fed later this year”, said Kishore Narne, associate director of commodity and currency at Motilal Oswal Commodities Broker Pvt. Ltd. Some analysts said that gold investors might have realised China would not be buying up a lot more gold.
This measure bottomed out in 2011, when gold hit an all-time high above $1,700 an ounce.
That helped the dollar up to 124.13 yen, near its highest in around three weeks, while the dollar index of 97.991 is on ground last visited in April. “I won’t buy gold right now”, adds Mr Mecklai.
Worldwide gold prices are down 6.53% year-to-date, while Indian gold prices are down 6.65% in the same period.
The United States dollar index gained to 97.862, from 96.025 in the previous week.
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The dollar jumped to three-month highs on Monday, extending its recent run of gains as expectations of a United States rate rise gathered pace.
