Gold close to erasing gains for year on outlook for rising rates
By Bloomberg
Gold traded little changed in London, with the metal almost erasing this year's gains as the outlook for higher U.S. interest rates amid an improving economy curbs demand for the metal.
Bullion rose as much as 0.7 percent earlier today as European equities declined and the Bloomberg Dollar Spot Index fell after climbing to a four-year high yesterday. Gold retreated this week to the lowest in almost nine months.
Rising interest rates reduce gold's allure because the metal generally only offers investors returns through price gains, while a stronger dollar typically cuts demand for a store of value. While money managers are holding their smallest bullish bet since January, the metal's drop has taken it near a technical level that suggests prices may be poised to rebound. Gold coin sales advanced last month in the U.S. and Australia.
"The stronger U.S. macro outlook is driving expectations for a U.S. interest rate hike, which is supporting the dollar" and hurting gold, David Wilson, an analyst at Citigroup Inc. in London, said today by phone. "You'd expect to see some bargain hunting at these lower prices, but whether that will be truly supportive is hard to say."
Gold for immediate delivery lost 0.2 percent to $1,211.34 an ounce by 1:25 p.m. in London, according to Bloomberg generic pricing. It reached $1,204.57 on Sept. 30, the lowest since Jan. 2, and is up 0.8 percent this year. Gold for December delivery fell 0.2 percent to $1,212.50 on the Comex in New York.
Trading Volume
Futures trading volume was 17 percent above the average for the past 100 days for this time of day, data compiled by Bloomberg show.
Economists surveyed by Bloomberg expect U.S. economic growth to accelerate next year. American employers probably added 215,000 jobs in September, economists expect data to show tomorrow. Payrolls rose 142,000 in August.
Gold has pared gains from earlier this year that were fueled partly by tensions in Ukraine and the Middle East. Holdings in gold-backed exchange-traded products fell 2.4 metric tons to 1,681.7 tons yesterday, the lowest in five years, data compiled by Bloomberg show
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Gold's 14-day relative-strength index was at 32.1. It fell last month below the level of 30 that suggests to some traders who study technical charts that price may be poised to rebound.
There are signs of more physical purchases. Gold sales from Australia's Perth Mint climbed 89 percent in September to the highest level in almost a year, according to data from the mint compiled by Bloomberg News. Gold coin sales by the U.S. Mint more than doubled in September to the highest since January.
There are holidays in India through Oct. 6 and in China through Oct. 8. Demand from the two-biggest gold buying nations may increase from next week, Afshin Nabavi, a senior vice president at bullion refiner MKS (Switzerland) SA in Geneva, said by phone today.
Silver for immediate delivery lost 0.6 percent to $17.0814 an ounce in London. Palladium was little changed at $778 an ounce, after touching $763.25 yesterday, the lowest since April 7. Platinum fell 0.8 percent to $1,273.24 an ounce. It reached $1,263.38 yesterday, the lowest since October 2009.