Gold price drops third day as palladium trades near lowest in 5 years

London (Aug 26)  Gold dropped for a third day, the longest stretch in a month, as the dollar strengthened. Palladium traded near the lowest in almost five years.

Bullion for immediate delivery retreated as much as 0.6 percent to $1,133.47 an ounce and traded at $1,135.15 at 10:38 a.m. in London, according to Bloomberg generic pricing. Prices earlier rose as much as 0.5 percent.

“In the current environment, there is quite a lot of volatility, not only in the gold market but also in the equity and interest rate markets,” Georgette Boele, a strategist at ABN Amro Bank NV in Amsterdam, said by phone Wednesday. “The action by the central bank in China, which improved sentiment and gave the dollar a boost, keeps gold under some pressure.”

Investors pulled money from exchange-traded products backed by gold for the first time in five days. Volatility has increased throughout global financial markets with Chinese stocks capping the steepest five-day drop since 1996 after lower interest rates failed to halt a $5 trillion rout.

Instability in global financial will hamper the Federal Reserve’s ability to raise interest rates in September, said Mohamed El-Erian, chief economic adviser at Allianz SE. Traders see the likelihood of a U.S. interest rate rise next month at 26 percent, down from odds of 40 percent at the end of July, data compiled by Bloomberg show.

Bearish Gold

“It’s a disinflation environment, a low growth environment, negative for commodities,” Justin Smirk, a senior economist at Westpac Banking Corp. in Sydney, said by phone. “I’m still bearish on gold. If the Fed’s not willing to hike because the U.S. economy is weaker and growth is slower, that’s not a bullish environment for gold either.”

Gold futures for December delivery lost 0.4 percent to $1,134.30 an ounce on the Comex after retreating 1.3 percent on Tuesday.

Silver for immediate delivery retreated 1 percent to $14.55 an ounce and platinum climbed 0.4 percent to $981.96 an ounce.

Palladium was little changed at $538.40 an ounce, after plunging 6.3 percent on Tuesday to the lowest close since September 2010. In South Africa, mine output of platinum and related metals, including palladium, surged 84 percent in June from a year earlier, official data showed Tuesday. The country is the world’s top palladium producer after Russia.

Source:  Mineweb