Gold Price Slips in End-of-Year Trading
New York (Dec 30) Gold prices fell Friday amid book-squaring ahead of the new year, after a volatile year for the precious metal.
Gold for February delivery was recently down 0.2% at $1,155.70 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices fell despite a weaker dollar, which is often bullish for precious metals. The WSJ Dollar Index, which measures the dollar against a basket of other currencies, was recently down 0.2% at 92.80.
Gold looks set to end the year up around 7%, despite a sharp decline in the final quarter of the year because of expectations of a stronger dollar and a rate increase from the Federal Reserve.
In July, haven buying following the British vote to leave the European Union pushed gold to a more-than-two-year high, with the metal jumping more than 6% in the single day after the vote in late June.
The impact of a Donald Trump victory in November, which some analysts forecast would provoke a similar rally, instead saw the metal slide dramatically as stock markets rallied. By late December, gold had fallen to a nearly 11-month low, and gold prices are down more than 11% over the last quarter.
“The decline experienced by the metal during December is largely due to the market tide favoring the U.S. economy which hopes for infrastructure and spending boost under a Trump administration, which has cemented expectations of higher interest rates and higher stock prices in 2017,” said Mihir Kapadia, head of Sun Global Investments.
In 2017, traders will be tracking competing themes. The Federal Reserve is expected to step up the pace of interest-rate rises, which would put pressure on the precious metal, as it doesn’t bear interest. Persistent strength in the dollar could also put a damper on the metal.
“We think that there is a risk that the prices of gold and silver might fall further in the short term as the Fed hikes rates more aggressively in response to some of Trump’s more inflationary policies,” Capital Economics said in a year-end note.
Next year could also bring safe-haven demand for the metal, analysts have said, despite gold’s mixed response to the major political surprises of 2016.
Gold’s decline in response to Mr. Trump’s victory could be overturned if policy announcements threaten to raise geopolitical tensions, analysts have said, while a series of elections in Europe, including in France and Germany, could signal a further rise in populist parties and threaten the stability of the eurozone.
Silver for March delivery was recently down 1.1% at $16.05 a troy ounce. April platinum was up 0.4% to $905.70 a troy ounce, while palladium for March delivery gained 0.7% to $680.20 a troy ounce.
Source: WSJ
