Embattled gold falls to 18-month low

Bengaluru — Gold prices fell to their lowest since January 2017 on Wednesday as the dollar hit a more than 13-month peak on demand emerging from concerns about Turkey’s financial turmoil.

The greenback, in which gold is priced, has been bolstered by the euro’s fall, which has been dogged by concerns over the European banks’ exposure to Turkey.

The index tracking the dollar against a group of six major currencies hit highest since June 27, 2017 of 96.862 on Wednesday.

Spot gold was down 0.45% at $1,188.24/oz at 4.06am GMT, after hitting its lowest since late January 2017 at $1,187.25.

US gold futures were down 0.47% at $1,195/oz.

“People have preferred to stay away from gold and park their money in other assets,” said Hareesh V, head of commodity research, Geojit Financial Services, based in south Indian city of Kochi.

“If gold closes below $1,190, prices will extend their fall to $1,150 or even more…. We don’t expect any major bounce back as all fundamentals are negative for gold.”

The dollar has also strengthened against the Turkish lira, driven by worries over President Tayyip Erdogan’s calls for lower interest rates and fraying ties between the US and Turkey, a Nato ally.

Erdogan said on Tuesday that Turkey would boycott electronic products from the US, retaliating in a row with Washington that has helped drive the lira to record lows.

Gold has fallen about 9% so far in 2018, pressured by rising US interest rates, a soaring dollar and failure to capitalise on its traditional role as a hedge against global and financial uncertainty.

Instead, investors have opted for US treasuries, seen as the ultimate safe haven, which meant they had to buy dollars.

This has led to a consolidation by investors through liquidations in exchange-traded funds (ETFs) and record level of short positions.

Holdings in SPDR Gold Trust, the world’s largest gold-backed ETF, fell 1.01% to 776.65 tons on Tuesday.

Holdings have fallen to their lowest since February 2016 and down about 11% from its peak in April.

“The uptake [in gold] is fairly limited as downside potential for gold prices is still extremely strong for now,” said Benjamin Lu, a commodities analyst at Singapore-based broker Phillip Futures.

Spot silver rose 0.1% to $14.97, after falling to its lowest since July 7, 2017 at $14.92.

Platinum fell 1% to $789, its lowest in nearly a month. Palladium was down 0.6% at $891.47.

Reuters