Gold Declines to One-Month Low as Resurgent Dollar Hurts Demand

Gold fell to the lowest level in almost a month as the outlook for higher U.S. interest rates strengthened...

Gold fell to the lowest level in almost a month as the outlook for higher U.S. interest rates strengthened the dollar, hurting demand for the metal as an alternative investment.

Bullion for immediate delivery dropped as much as 0.4 percent to $1,214.99 an ounce , the lowest intraday level since Feb. 26, and traded at $1,217.59 at 11:07 a.m. in Singapore, according to Bloomberg generic pricing. The metal slumped 2.3 percent on Wednesday as the U.S. currency rose 0.7 percent.

Gold has declined 3 percent this week, set for its worst such showing since November as a chorus of Federal Reserve policy makers emphasized the central bank may raise borrowing costs as soon as April. Higher rates damp the appeal of bullion as it doesn’t pay interest. The greenback is heading for its best weekly advance this year against a basket of 10 major currencies.

“The expectations of a rate hike indirectly will drag down gold prices especially given that gold has lost a little bit of upside momentum,” Bernard Aw, a strategist at IG Asia Pte in Singapore, said by phone “It can’t really sustain beyond the $1,250 level. If it can’t sustain above that level, it means it is quite vulnerable to a pullback, which is what we’re seeing now.”

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  • Fed Bank of St. Louis President James Bullard said Wednesday policy makers should consider raising rates at their April gathering amid a broadly unchanged economic outlook and prospects of inflation and unemployment exceeding targets, echoing similar comments by San Francisco Fed President John Williams and his Atlanta counterpart Dennis Lockhart earlier this week.
  • Traders put the chances of an April move at 6 percent, according to futures data compiled by Bloomberg. The odds of a single 25-basis-point move by December were at 70 percent, climbing from 68 percent at the end of last week.
  • Investors continued to add to holdings in exchange-traded funds backed by gold. Assets rose for a seventh day to 1,768.1 metric tons on Wednesday, the highest since March 2014, according to data compiled by Bloomberg.
  • Newcrest Mining Ltd., Australia’s biggest gold producer, dropped 2 percent in Sydney, while Zijin Mining Group Co. slid 1.7 percent in Hong Kong.
  • Bullion of 99.99 percent purity decreased 1.2 percent to 255.29 yuan a gram ($1,219.32 an ounce) on the Shanghai Gold Exchange.
  • Spot silver lost 0.1 percent to $15.24 an ounce, after sliding as much as 4.1 percent on Wednesday, the biggest intraday decline since Oct. 8.
  • Spot platinum fell 0.2 percent to $957.60 an ounce, extending Wednesday’s 3.6 percent drop, and palladium retreated 0.7 percent to $577.30 an ounce.

To contact the reporter on this story: Ranjeetha Pakiam in Singapore at rpakiam@bloomberg.net. To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net, Glenys Sim

By: Ranjeetha Pakiam

©2016 Bloomberg News

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