Gold price gains on dollar and shares
New York (Dec 8) Gold rose on Tuesday as the dollar receded slightly and European shares fell, though expectations that the US Federal Reserve will raise interest rates next week kept gains in check.
A slide in commodity prices — particularly crude oil’s drop to its lowest in almost seven years as the Organisation of the Petroleum Exporting Countries (Opec) continues to pump near-record oil to defend market share — also prevented gold from reaching higher levels.
Any further weakness in oil could trigger fears of deflation, a bearish factor for gold that is often seen as a hedge against oil-led inflation.
Spot gold rose 0.5% to $1,075.10 an ounce by 2.43pm GMT, having slid 1.5% in the previous session.
US gold futures fell 0.1% to $1,074.50 an ounce.
"For gold now it’s just a wait and see game. We had a short-covering rally yesterday but it ran out of steam quickly, indicating that the market is still preoccupied with the rate hike," said Saxo Bank’s head of commodity strategy Ole Hansen. "At the same time, though, the market is not prepared to react in terms of cutting exposure until we actually have the news," he said.
European shares fell, while the dollar was down 0.2% against a basket of leading currencies, retreating after a two-day rally triggered by strong US payrolls data on Friday.
Signs that the US labour market is recovering supported market views that the Fed would raise rates for the first time in nearly a decade at its policy meeting on December 15-16.
Georgette Boele, commodity strategist at ABN Amro, said Tuesday’s gains in gold would be short lived as they were due to bargain hunting on the back of a brief retreat in the dollar. "We’re going to head towards $1,000 before end of this year because we expect a stronger dollar. The Fed rate hike is not fully priced in and we expect risk sentiment to improve somewhat, which is not good for gold."
Bullion has lost about 9.5% so far this year, heading for a third straight annual decline, as investors abandon risk-free assets in favour of equities ahead of higher rates in the US.
Assets in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, tumbled 0.65% to 634.63 tonnes on Monday, the lowest level since September 2008.
Speculators held a record-high short position in COMEX gold futures and options in the week to December 1, recent data showed.
Elsewhere, China’s gold reserves rose by nearly 21 tonnes last month, the biggest purchase since it began disclosing monthly data on the stockpile earlier this year, central bank data showed on Tuesday.
Among other precious metals, silver was up 0.1% at $14.23 an ounce, having dropped by 2% in the previous session. Platinum edged up 0.4% to $859.66, after a 3% decline on Monday, while palladium gained 1.2% to $555.72
Source: bdLive.za
