Gold heads towards lowest level in nearly six years on dollar strength

November 30, 2015

New York (Nov 30)  Gold edged lower on Monday, heading towards its lowest level in nearly six years as the dollar hit a multimonth high, and on track for its steepest monthly slide in two-and-a-half years on prospects of a US interest rate hike this year.

Spot gold slipped 0.1% to $1,056.01 an ounce by 10.53am GMT, not far off from of Friday’s $1,052.46, the lowest since February 2010.

A stronger dollar, up to a fresh eight-month high against a basket of major currencies, weighed on gold and made it more expensive for foreign holders.

Bullion has lost 7.5% of its value in November, its biggest monthly dip since June 2013, as investors remained focused on a possibly imminent rate hike in the US.

Gold, a noninterest-paying asset, could take a hit from higher rates as the dollar gains and the opportunity cost of holding it increases.

The US Federal Reserve holds its next policy meeting on December 15-16.

A US payrolls report on Friday will be even more closely watched than usual. A strong number after a surge in job growth in October could cement expectations that the Fed will deliver its first hike in almost a decade.

"A number close to the 200,000 mark will be sufficient to confirm in the Fed’s mind that the time is right to act," ICBC Standard Bank analyst Tom Kendall said.

The European Central Bank (ECB) policy meeting on Thursday will also be eyed for how it affects the currency markets. The ECB is widely expected to ease policy.

"I thought there was a possibility that the euro had already anticipated everything that was going to be delivered by Draghi this week but it seems not," Mr Kendall said.

"Gold keeps being under pressure in the absence of anything else supportive."

Investors are pulling money out of bullion funds and worsening the sell-off in gold.

"With the charts looking increasingly dicey as we head into the Fed meeting, just as investment money continues to flee the complex, the odds are good that the $1,000 level is the next stop," said INTL FCStone analyst Edward Meir.

Assets in SPDR Gold Trust, the world’s top gold-backed exchange-traded fund, fell to their lowest since September 2008 on Friday.

Silver rose 0.5% to $14.12 but was set for a 10% monthly loss.

Palladium has lost 20% for the month and was down 0.4% at $545.75/oz.

Platinum has lost 16% in November and fell to a seven-year low of $820.60 on Monday.


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