Gold Price Loses Luster for Third Year as Investors Sell From Funds
London (Dec 31) Gold's image as a haven asset has taken a battering with the metal heading for its third-straight annual loss as investors sold from gold-backed funds.
Bullion was little changed in London on Thursday after touching the lowest in more than a week yesterday. It’s down 10 percent this year and has plunged about 45 percent since reaching a record in 2011.
Gold is in the longest run of yearly losses since 2000 as the dollar surged on the back of tighter monetary policy in the U.S, joining a collapse in prices of commodities from iron ore to oil. Holdings in gold exchange-traded products have declined 10 times in the last 13 sessions to 1,466.4 metric tons, near the lowest in more than six years.
“Gold is suffering from the general exodus out of commodity investments,” Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen, said by e-mail. “Being one of the most-traded commodities through ETFs, the selling pressure from paper investors has been felt particularly hard and gold’s safe-haven status has suffered.”
The metal for immediate delivery added 0.1 percent to $1,062.29 an ounce by 11:52 a.m. in London, according to Bloomberg generic pricing. It reached a five-year low earlier this month.
Gold will face a tough challenge at the start of 2016 and prices may drop toward the $1,000 level before recovering toward $1,200 by the end of the year as the dollar and bond yields retreat, Hansen said.
The Federal Reserve raised borrowing costs for the first time in almost a decade this month and traders are now focusing on the pace of further rate increases. While HSBC Holdings Plc predicts just two moves next year, Goldman Sachs Group Inc. is among banks that see four. Bullion will drop to $950 by the end of next year, according to Barnabas Gan, an economist at Oversea-Chinese Banking Corp., who’s the top ranked precious metals forecaster.
Money managers have been betting on more price declines since November, U.S. Commodity Futures Trading Commission data show. Earlier this month, they held the biggest net-short position since at least 2006.
“With light physical demand, the bears are still in control of this market and continue to pressure the downside,” Commerzbank AG wrote in an e-mailed report.
Silver is also headed for a third year of declines, dropping 12 percent to $13.88 an ounce in 2015.
Palladium slumped 31 percent, the most since 2008, while platinum lost 28 percent. The two metals, used in catalytic converters that curb car and truck emissions, dropped this year as China’s slowdown helped reduce demand and mine output from South Africa increased. The Volkswagen AG emissions scandal also hurt prospects for consumption.
Source: Bloomberg
