Gold price marks 5th loss in six sessions
San Francisco (July 14) Gold futures finished with a loss on Thursday, their fifth in six sessions, as global equities mostly climbed after the Bank of England surprised investors by opting not to cut benchmark interest rates.
Some analysts expected a rate cut in the wake of the U.K.’s decision to exit the European Union.
U.S. stocks climbed and European equities ended mostly higher following the BOE decision, dulling investment interest in gold.
August gold GCQ6, -0.73% fell $11.40, or 0.9%, to settle at $1,332.20 an ounce. Prices gained 0.6% on Wednesday after a four-session decline.
September silver SIQ6, -0.55% eased by 9.1 cents, or 0.5%, to $20.322 an ounce. Silver futures settled near a two-year high on Wednesday.
The ICE U.S. Dollar Index DXY, -0.21% was up ahead of the BOE decision, but traded 0.1% lower at gold’s settlement. Gold often trades inversely with the greenback, but the rally in the stock market helped to draw investors away from gold.
David Cameron gave a witty performance in the House of Commons in his final appearance as U.K. prime minister.
The Bank of England unexpectedly left unchanged its key interest rate at a record low of 0.5%. It also made no changes to its 375-billion-pound ($495 billion) asset-purchase program. Markets had overwhelmingly priced in chances of a rate cut, which would have been the first since March 2009.
The decision marked the first after the June 23 referendum in the U.K. that set the country on course to exit the European Union, or Brexit.
“Investor perception that U.K. economy will be less affected by [Brexit] resulted in fall of gold and silver,” said Chintan Karnani, chief market analyst at Insignia Consultants. “Technicals also came into play as gold fell below $1,336.” It tapped an intraday low Thursday at $1,320.40, according to FactSet.
Key support for gold is at $1,312, said Karnani.
Christopher LaFemina and other analysts on the Jefferies metals-and-mining research team forecast that gold could hit $1,400 an ounce this year, in a recent research note. That is up from an earlier prediction for $1,200 an ounce. The group expects that number to be the average price for this year’s fourth quarter.
“We expect demand for gold as an uncorrelated asset in a diversified portfolio to remain at high levels for the foreseeable future,” LaFemina said.
Jefferies analysts were also upbeat on the metals-and-mining stock sector.
“While gold equities have performed well year to date, our analysis indicates that the outlook for Barrick ABX, +0.05% Randgold GOLD, -1.19% and Kinross KGC, +0.00% has materially improved even if the gold price remains at or even modestly below the current level,” they said. “We have upgraded ABX and RRS. LN from Hold to Buy and KGC from Underperform to Hold. Barrick and Buy-rated Acacia ACA, -1.86% are our top picks in gold mining.”
Meanwhile, “silver is highly vulnerable to big short-term crash,” according to Karnani. Prices for the industrial metal have climbed more than 9% this month.
On a technical basis, silver will need to trade above $20.90 “or else fatigue will come in and there can be a correction to $18.60 and $17.69.,” said Karnani. “We are advising silver traders to remain invested in silver but don't invest further at current prices. Silver will continue to outperform gold.”
Similarly, Adam Koos, president of Libertas Wealth Management Group, said buying silver at the current price level “wouldn’t make sense considering the fact that it’s overbought on a short-term basis.”
Still, for traders, “buying on pullbacks would be a good move, understanding that doing so requires patience,” said Koos.
“The relative strength of metals in general have been outpacing stocks over the past six months and I expect this trend to continue,” he added.
Elsewhere in metals, October platinum PLV6, +0.49% rose $4.40, or 0.4%, to $1,104.60 an ounce, while September palladium PAU6, +1.15% edged up $6.90, or 1.1%, to $651.10 an ounce. September copper HGU6, +0.09% added less than half a cent to $2.243 a pound.