Gold eases as dollar strengthens, fund outflows resume

November 27, 2014

London (Nov 27)   Gold eased on Thursday, hurt by gains in the dollar index and fresh outflows from bullion-backed funds, with traders cautious ahead of a U.S. holiday and this weekend's Swiss referendum on central bank bullion assets.

Spot gold was down 0.2 percent at $1,195.60 an ounce at 1100 GMT, while U.S. gold futures for December delivery were down $2.30 an ounce at $1,194.30.

The dollar climbed against a basket of currencies, with the euro falling against the U.S. unit after data showed Spanish consumer prices fell more than expected.

That has raised expectations that the European Central Bank will resort to more aggressive easing of monetary policy. Speculation that the U.S. Federal Reserve will tighten policy before other central banks has pressured gold prices this year.

Higher U.S. interest rates would lift the opportunity cost of holding non-yielding bullion, and would also benefit the dollar, in which the metal is priced.

However, gold's push lower has slackened in the absence of fresh news.

"Everybody already thinks the dollar is going to continue to strengthen next year... and that U.S. interest rates are going to rise at some point, so to a certain extent that has already been priced in," Citi analyst David Wilson said.

"Maybe the market is now looking for what the next driver is going to be."

Gold prices have steadied within a $20 range this week after sliding to 4-1/2 year lows in November, with traders struggling to pick the next direction of trade.

Outflows from the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, resumed on Wednesday. Holdings fell 2.1 tonnes to 718.82 tonnes, near six-year lows.

Traders are now awaiting Sunday's Swiss vote on how it manages central bank gold reserves for more trading cues. If a 'yes' vote is passed, the Swiss central bank would have to buy about 1,500 tonnes of gold over the next few years, analysts say.

Among other precious metals, silver was down 0.6 percent at $16.37 an ounce, platinum was down 0.3 percent at $1,219.30 an ounce and palladium was down 0.6 percent at $795.47 an ounce.

Source: brecorder

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