Gold price slips as Turkish currency crisis bolsters the dollar

London (Aug 10)  Gold prices were on track for their fifth consecutive weekly fall on Friday as the dollar surged to its strongest in more than a year, making bullion more expensive for buyers with other currencies.

Investors rushed to the safety of the greenback as the Turkish lira collapsed as much as 14 percent on Friday to a record low, Russia's rouble crumbled to a two-year bottom and the euro and pound touched their weakest in a year. With the turmoil in Turkey spreading to other markets, gold, traditionally used as a safe investment in times of uncertainty, also saw some extra interest, Saxo Bank analyst Ole Hansen said.

But this was overpowered by the effect of the strong dollar, he added.

"There is a battle going on (in the gold market) between the strengthening dollar and some safe-haven demand emerging from the contagion risk following the collapse of the lira."

Spot gold was down 0.2 percent at $1,210.15 an ounce at 0945 GMT, with the dollar 0.5 percent stronger against a basket of major currencies.

U.S. gold futures were 0.2 percent lower at $1,217.90 an ounce.

Gold has tumbled more than 11 percent from an April high to a one-year low of $1,204 last week as the dollar rallied to 13-month highs and investors exited gold positions and began to speculate on lower prices.
Holdings of gold at exchange-traded funds (ETFs) tracked by Reuters have fallen by 3.7 million ounces, or 6.3 percent, since late May to the lowest in almost a year. Speculators have meanwhile expanded their net short position on the Comex exchange to the biggest ever recorded, helping to drive prices lower. Adding to the pressure on gold are expectations that the U.S. Federal Reserve will raise interest rates next month, bolstering the dollar and U.S. bond yields and damaging the appeal of non-yielding gold. If gold rises, investors could be forced to liquidate short positions, which would lift prices. But this is unlikely to happen until gold reaches around $1,230, according to Hansen.

In the meantime, he said, "the bears are still in control". Momentum indicators suggest prices will fall further, analysts at ScotiaMocatta said, with support at gold's July 2017 low of $1,204.90.

Silver was down 0.3 percent at $15.36 an ounce, platinum was 0.2 percent higher at $831.70 an ounce and palladium had lost 0.5 percent to $902.25 an ounce.

Silver and palladium were on track for small weekly losses, while platinum was up slightly on the week.