Gold falls below $1,200 in thin session trade
New York (Dec 23) In quiet trading on Monday, gold futures were traded down and fell below the psychological $1,200 an ounce mark, as investors gear up for the upcoming holiday. A break below that level is a sign that bearish sentiment still persists on the gold market.
Gold futures for delivery in February were seen 0.55% lower at $1,197.20 an ounce as of 10:09am GMT, while silver futures for January delivery followed suit and were seen 0.41% down at $19.375 an ounce.
Holdings in the SPDR Gold Trust, the world's biggest gold-backed exchange-traded fund, marked the first inflow since November 5 as they increased by 5.4 tonnes and stood at 814.12 tonnes on Friday.
Nevertheless, analysts say gold markets are under pressure due to ongoing outflows from Exchange Traded Funds (ETFs), which have been the main market movers this year when it comes to gold.
According to the latest comments from Societe Generale (SoGe) "Gold lost its role as a safe haven against systemic risk in 2013. The Italian elections, the Cyprus bail-in and even the US shutdown and debt ceiling failed to drive gold higher. On top of that, financial markets began to anticipate the end of Fed QE in early 2013, and this maintained pressure on the gold price throughout the year, as the expansion of central bank balance sheets was considered to be a key gold driver."
Moreover, analysts from SoGe see "further potential downside for next year. The three negative factors that we had already been concerned about in our January report are still in place: 1) equities still stand at historical lows relative to gold, making the latter less attractive; 2) the US economy is recovering, pushing rates up and offering some returns to investors; 3) inflation is still under control."
The US dollar index, measuring the strength of the greenback versus a basket of six of its major peers, traded 0.09% lower at 80.504 points at the time of writing.
Over the year, gold has lost around 28% of its value due to never-ending speculation over QE reduction. Gold dropped below the $1,200 threshold for the first time since June last week, with the Federal Reserves Dec Tapering being the major driver behind the slide.
"The Fed’s move has been driven by improved US data - including jobs, gross domestic product growth, spending, investment - and political progress - the Senate passed the bipartisan budget - and balanced by a reinforcement of forward guidance that interest rates will stay very low for a considerable time after quantitative easing ends and until unemployment falls below 6.5%," Mike van Dulken, Head of Research at Accendo Markets, commented on the decision by the Fed on Wednesday.
In the week ahead, the US is about to release several key reports on durable goods orders, new home sales (both on Tuesday) and jobless claims (on Thursday). There are no major data releases due for Europe or Asia throughout the week.
