Gold recovers from lowest 2014 price

New York (Oct 6)  Gold rose from the lowest price this year as the U.S. dollar weakened and investors anticipated the return of buyers in China, the top consumer, from a week-long national holiday. Platinum slid to the lowest since 2009.

The Bloomberg Dollar Spot Index fell 0.3 percent, retreating from the four-year high it reached Oct. 3 when U.S. payrolls beat forecasts, stoking expectations the Federal Reserve will increase interest rates. China, which overtook India in 2013 to be the world’s largest consumer of gold, ends a week-long national holiday Oct. 8.

“Although downward pressure has continued this week, especially with key physical markets in Asia still out on holidays, follow-through selling has been relatively limited,” UBS AG analysts Edel Tully and Joni Teves said in a report today. “The critical technical support around $1,180 has held so far and prices appear to be finding some stability not too far south of the $1,200 psychological level.”

Bullion for immediate delivery gained 0.2 percent to $1,193.80 an ounce by 11 a.m. in London, according to Bloomberg generic pricing. The metal fell as much as 0.7 percent earlier today to $1,183.24 an ounce, the lowest since Dec. 31. Futures for December delivery rose 0.1 percent to $1,194 on the Comex in New York.

Futures trading volume was 17 percent above the average for the past 100 days for this time of day, according to data compiled by Bloomberg.

Interest Rates

“Gold has held up relatively well compared to the other precious metals but, in our view, remains vulnerable,” Barclays Plc analysts including Suki Cooper said in an e-mailed note. Barclays expects the U.S. Federal Reserve to start increasing rates in June next year, “earlier than current market pricing of October 2015, and with a risk that it may tighten in March 2015 should the economy improve faster,” according to the note.

“Market focus will shift towards the extent of strength in Chinese gold demand after the national holiday,” Cooper said.

The Fed is considering the timing for its first interest- rate increases since 2006 amid signs the U.S. economy is recovering. Higher rates reduce gold’s allure because the metal generally only offers investors returns through price gains, while a stronger dollar typically cuts demand for a store of value.

The Bloomberg Dollar Spot Index rose for a seventh week in the period ended Oct. 3, the longest rally since June 2010, after American employers added more workers than forecast and the unemployment rate fell to the lowest since July 2008.

Annual Loss

Bullion is headed for the first back-to-back annual loss since 2000 after tumbling 28 percent last year, the most in three decades. The net-long position in gold declined 15 percent to 37,743 futures and options in the week ended Sept. 30, U.S. Commodity Futures Trading Commission data show. The holdings are down 72 percent in seven weeks.

Platinum slumped as much as 2.8 percent to $1,190.25 an ounce in London, the lowest price since July 2009, before trading at $1,220.13. Palladium fell as low as $737.75 an ounce, the lowest since Feb. 27, before trading at $754.54.

Silver rose 1.1 percent to $17.0341 an ounce.

Source:  Bloomberg