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Gold Falls Near Eight-Month Low as Dollar Advances on Fed

September 19, 2014

New York (Sept 19)  Gold fell near an eight-month low in New York after the Federal Reserve raised its interest-rate forecasts this week, strengthening the dollar.

Gold lost 0.7 percent this week as the U.S. central bank raised its estimate for the federal funds rate even as policy makers kept a pledge to hold borrowing costs near zero for a considerable time after ending debt buying. The dollar neared a 14-month high set versus the euro yesterday.

Higher rates reduce gold’s allure because the metal only offers investors returns through price gains, while a stronger dollar typically cuts demand for a store of value. Bullion’s decline has kept its 14-day relative strength index held below 30 for nine straight days, signaling prices may be poised to rebound. Trading volumes in China, the biggest buyer, have picked up this week.

“The overall direction will be dictated by the dollar,” David Govett, head of precious metals at Marex Spectron Group in London, said in a note today. “Physical buying that has been lacking for such a long time, seems to be coming out of the woodwork and that provided support.” 

Gold for December delivery lost 0.3 percent to $1,233.10 an ounce by 7:27 a.m. on the Comex in New York. Prices are down a third week and reached $1,216.30 yesterday, the lowest since Jan. 6. Gold for immediate delivery slipped 0.2 percent to $1,222.59 in London, according to Bloomberg generic pricing.

Futures trading volume was 54 percent above the average for the past 100 days for this time of day, data compiled by Bloomberg show.

Scotland voted to stay in the U.K., easing concern a breakup of the union may spur financial turmoil. The result had limited or no impact on gold prices, according to Marex Spectron’s Govett and UBS AG.

Chinese Volumes

In China, volumes for the benchmark spot contract on the Shanghai Gold Exchange this week averaged about 47 percent more than the average this year, the latest data show. The country’s jewelry fabrication slipped 22 percent in the first half, GFMS, a research unit of Thomson Reuters Corp., said in a report yesterday. Bloomberg competes with Thomson Reuters in selling financial and legal information and trading systems.

Silver for delivery in December fell 0.4 percent to $18.445 an ounce in New York. It reached $18.27 yesterday, the lowest since June 2013. Platinum for delivery in October lost 0.1 percent to $1,347.80 an ounce, after touching $1,340 yesterday, the lowest since Dec. 26. Palladium for delivery in December declined 0.5 percent to $827.15 an ounce. All three metals are set for a third week of losses.

Source: Bloomberg

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