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Precious Metals

With dollar strengthening, gold touches 5-month low

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Gold touches its lowest over five months

Amid pressure from a stronger U.S. dollar and expectations that the Federal Reserve will raise interest rates in December, gold fell 1 per cent on Monday to touch its lowest in more than five months.

By 0245 GMT, spot gold was down 0.6 per cent at $1,218.90 an ounce. The precious metal fell 1 per cent to end up at $1,213.15 an ounce (its lowest since June 3) in early session.

U.S. gold futures slipped 0.5 per cent to $1,218.50 per ounce.

Inflation worries

U.S. Treasury futures declined to 10-month lows on Friday as bond investors worried that U.S. President-elect Donald Trump’s policies will increase inflation and reduce the value of debt.

According to Jeffrey Halley, senior market analyst at OANDA, “What we’re seeing today is the continuation of long liquidation going through the market”.

“People seem to have unwound their Trump-risk and are now talking more about ‘Trumpfation’, with Trump’s fiscal policies that he wants to enact with all this infrastructure that would push up inflation and that would push up borrowing rates and yields in the States”, continued Halley.

“When yields go up in the U.S., the appeal of other assets, such as gold … becomes less.”

“I think with a stronger dollar and high U.S. dollar yields, gold is going to continue to stay under quite a lot of pressure now,” Halley added.

In the meantime, the dollar reached a nine-month high against a basket of major peers early on Monday.

Gold

Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.

Silver

Silver touched its worst since June 9 at $17.00 an ounce earlier in the session but recovered to $17.22 (down 0.7 per cent).

Platinum

Platinum was almost same at $939.50 an ounce and palladium was down 0.2 per cent at $671.00.

Paul

The author Paul