Gold price slips on tumbling equity markets and worries about rising interest rates

February 9, 2018

London (Feb 9)  Gold slipped on Friday on tumbling equity markets, a firmer dollar and worries about rising global interest rates, though the metal remained underpinned by its appeal as a safe-haven asset in times of market turmoil.

The dollar rose against a currency basket, heading for its best week since late October, while a 4% drop in Chinese shares dealt reeling world stock markets a fresh blow, as nerves about rising borrowing costs and soaring volatility grew.

"Just like any other commodity, gold is getting caught up in risk reduction, but overall the stock market gyrations have most certainly provided underlying support," said Ole Hansen, head of commodity strategy at Saxo Bank. "The dollar is strong on the back of [rising risk reduction]. [However], the market is concerned about whether this [US] tax gamble is going to pay out. If it doesn’t, it could have a negative growth impact, that’s not going to be dollar-positive."

A strong dollar makes dollar-priced gold costlier for non-US investors.

Spot gold fell 0.3% to $1,314.70 an ounce at 11.19am GMT. Prices touched their lowest since January 4 at $1,306.81 on Thursday, and the precious metal is down 1% for the week so far, heading for a second straight weekly drop. US gold futures were down 0.2% at $1,316.70 an ounce.

The yield on benchmark 10-year US treasuries, which tends to be the driver of global borrowing costs, was hovering at 2.86%, just short of both its Thursday peak and Monday’s four-year high of 2.885%.

"The threat of rising interest rates will have some downside pressure on gold ... However, in the near term, gold will gain due to volatile markets," said Helen Lau, analyst at Argonaut Securities. Rising yields increase the opportunity cost of holding non-yielding bullion.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, have fallen over the last three sessions, and declined 1.7% so far this week, the worst since the week ended July 30, 2017.

Silver fell 0.4% to $16.36 an ounce, after touching its lowest since December 22 2017 at $16.22 on Thursday. Platinum rose 0.1% to $970.90 an ounce. It hit its lowest since January 10 at $965 in the previous session. Palladium rose 1% to $971.90, its lowest since October 25 2017 at $958.95, on Thursday.


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