Gold price enjoys some respite as dollar retreats
London (Dec 21) Gold firmed on Wednesday as a retreat in the dollar from the previous session’s 14-year peak prompted some buyers to hunt for bargains after the metal’s sharp slide from its November high.
Gold had been hit hard by a surge in the dollar after the November US elections, and a more hawkish tone from the Federal Reserve after it hiked US interest rates for only the second time in a decade in December. Prices of the metal have fallen more than 11% since the elections before finding a floor at around $1,125/oz.
Spot gold was up 0.2% at $1,133.90/oz at 10.35am GMT, while US gold futures for February delivery were up $2.20/oz at $1,135.80.
"With what we’re seeing in the dollar at the moment, there is no real driver to push gold lower," ABN Amro analyst Georgette Boele said. "Because of that, we’re seeing it taking a bit of a breather. We’ve had some big moves this year, and [buyers] don’t want to burn their fingers for the remainder of the year."
The dollar eased on Wednesday from the 14-year high it hit the day before, pausing in a post-US elections run higher that has represented its entire gain for the year, while concerns over the banking sector pulled European shares lower. The Fed, which raised interest rates last week, signalled three more increases next year. Gold is highly sensitive to rising US rates, which lift the opportunity cost of holding nonyielding bullion, while boosting the dollar, in which it is priced.
Hefty outflows from gold-backed exchange-traded funds (ETFs) of late have been putting pressure on gold, HSBC said in a note.
"Declines of 300,000oz reported on Monday night are the latest in more than a month of consecutive gold ETF outflows," it said. "The GLD, the world’s largest gold ETF, has fallen 13% to 26.6-million ounces since the US November elections."
Among other precious metals, silver was down 0.4% at $16.02/oz, off the previous day’s low of $15.59/oz, its weakest since April 11.
Platinum was 0.1% lower at $914.70/oz.
Palladium was down 0.6% at $660.20/oz, having earlier touched a six-week low of $658.50. It remains the best performing precious metal this quarter, with a drop of just 8%, compared with a 14% drop in gold prices and an 11% retreat in platinum.
Source: Reuters
