Gold languished near its lowest level in almost six years on Tuesday, while silver and platinum also held near multi-year lows on a strong dollar and increasing expectations that the Federal Reserve would increase USA interest rates next month.
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Around US$1.0bn was pulled out of precious metals funds in the four days to Tuesday, as the dollar rose to its strongest level in seven months. Gold benefits from weaker currency and low interest rates.
“Many traders took the opportunity to make a long weekend of it by taking today off too”.
The bank analysts put the likely continuing decline down to the commencement of Fed interest rate rises (widely anticipated to begin next month) and the continuing lack of price inflation against which gold is seen as an important hedge.
While trading was slower during the U.S. day session Wednesday, due to the U.S. Thanksgiving holiday on Thursday, there was a very heavy slate of U.S. economic data out.
Spot gold reached a peak price of $1,080.51, and inched up 0.7% to reach $1,077.30 an ounce.
Bullion of 99.99 percent purity declined 0.5 percent to 220.80 yuan a gram ($1,074 an ounce) on the Shanghai Gold Exchange.
Gold and the dollar typically move in opposite directions, which means if the dollar goes up, gold futures will fall as gold, measured by the dollar, becomes more expensive for investors.
Bets on higher rates have risen as a resilient US labor market powers consumer spending, adding to signs that the economy may be robust enough to withstand higher rates. Target company Allergan closed 3.4 percent lower after the $160 billion deal announcement.
“People are preparing for the rate hike… if you look at strategists’ recommendations of the top 20 trades, gold is not in there”, MKS SA senior vice president Bernard Sin said. As a result, as the prospect of rate increases has got closer, gold prices have been falling.
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China’s net gold imports from main conduit Hong Kong fell in October from a 10-month high reached in the previous month, data showed yesterday. Silver was up 0.4 per cent at $US14.16 an ounce, while palladium was 0.1 per cent higher at $US537.50 an ounce.
