Gold Price Sinks in Longest Rout Since ‘96 as Goldman Sees More Losses

July 22, 2015

London (July 22)  Gold futures retreated for a 10th day in the longest run of losses since 1996 as Goldman Sachs Group Inc. predicted further declines and investors sold more through funds.

The metal dropped 6.1 percent as it fell every day since July 9 in New York. Prices reached a five-year low of $1,080 an ounce on Monday and holdings in exchange-traded products are at the lowest since 2009.

Bullion has fallen out of favor with investors as the Federal Reserve prepares to raise interest rates, boosting the dollar and hurting gold’s allure. Prices could fall below $1,000 for the first time since 2009, Jeffrey Currie, Goldman’s New York-based head of commodities research, said in an interview. ABN Amro Bank NV’s Georgette Boele and Robin Bhar of Societe Generale SA are also bearish.

“I expect gold prices will fall further,” Boele said by e-mail from Amsterdam on Wednesday. “Expectation of higher rates in the U.S. is negative for the precious metals.”

Bullion for August delivery lost 0.9 percent to $1,093 by 5:17 a.m. on the Comex in New York. It’s down 7.7 percent this year. In London, metal for immediate delivery retreated 0.6 percent to $1,094.43, according to Bloomberg generic pricing.

Fed Chair Janet Yellen told lawmakers last week that she expects officials to raise borrowing costs this year. There’s a more than 50-50 chance the Fed will increase them in September, according to St. Louis Fed President James Bullard. A gauge of the U.S. currency climbed 19 percent over the past year.

U.S. Rates

Higher rates diminish the appeal of the metal, which typically offers returns only through price gains. China’s disclosure last week of government gold holdings that were less than analysts had expected also hurt bullion.

Holdings in gold-backed exchange-traded products contracted for a fourth day, declining 4.4 metric tons to 1,563.8 tons as of Tuesday, data compiled by Bloomberg show. They’ve fallen almost every quarter since reaching a record 2,632.5 tons in December 2012.

Still, lower prices may spur some retail purchases. The U.S. Mint sold 111,000 ounces of American Eagle gold coins so far in July, already the highest for a month since April 2013, when prices tumbled into a bear market.

“Although the physical markets have not responded vigorously to gold’s recent price decline, we do not think this necessarily means that physical demand is bound to remain weak,” HSBC Holdings Plc analysts said in a report.

Silver for September delivery lost 0.4 percent to $14.73 an ounce. Platinum for October dropped 1.4 percent to $970.40 an ounce, while palladium for September fell 1.6 percent to $619.55 an ounce.

Source: Bloomberg

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