Thursday, 15 December 2016

Gold near 10-1/2 month low, heads for sixth weekly drop

Gold edged up on Friday but remained near its weakest level in 10-1/2 months, pressured as the U.S. dollar surged to multi-year peaks after the Federal Reserve raised interest rates and projected further hikes in 2017.

Spot gold was up 0.2 percent at $1,130.81 an ounce by 0249 GMT, after touching its weakest level since Feb. 2 at $1,122.35 in the previous session. Gold fell nearly 1.4 percent on Thursday, its biggest percentage decline in three weeks.

The metal was down more than 2 percent for the week, on track for its sixth consecutive weekly loss.

U.S. gold futures were up 0.3 percent at $1,132.90 an ounce, after dropping nearly 3 percent in the prior session.

"The nature of recent gold selling implies fresh shorting as well as liquidation," said HSBC analyst James Steel.

"The selling may not yet be exhausted. However, the pace and intensity of the selling pressure and price declines seen on Wednesday and Thursday are unlikely to continue, at least not at the present rate."

The dollar index, which measures the greenback against a basket of currencies, was up 0.1 percent at 103.090.

"The bearish factors for gold ‒ namely a high U.S. dollar, rising yields and equities and risk-on investor demand appetite ‒ leave bullion clearly on the defensive," Steel said.

Rising rents lifted underlying U.S. inflation in November, pointing to a steady build-up of price pressures in the economy that could support more interest rate increases from the Federal Reserve next year.

The prospect of further monetary policy tightening in 2017 was also bolstered by other data on Thursday showing a drop in the number of Americans filing for unemployment aid last week.

"Gold prices continued to come under selling pressure as the impact of the Fed’s more hawkish view of rates in 2017 weighed on investor sentiment," ANZ said in a note.

"Subsequent data showing the U.S. labour market is relatively strong, with jobless claims falling 4,000 to 254,000, also helped validate that view."
Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, which are down over 10 percent since November, fell 0.84 percent to 842.33 tonnes on Thursday.

Silver gained 0.4 percent to $16.03 an ounce, after falling over 5 percent on Thursday. It has fallen over 4 percent so far this week.

Platinum rose 0.6 percent to $898.75, after dropping to the lowest since early February in the prior session.

Palladium fell 0.4 percent at $697.25, on track to finish the week down over 4 percent.
                                                                                         ( News source REUTERS)

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