Gold sinks to one-month low as dollar soars

Bengaluru — Gold fell for a seventh straight session on Monday, hitting its lowest in a month as the dollar jumped to 16-month highs on the back of political uncertainty in Europe and the US Federal Reserve’s hawkish stance on interest rates.

Spot gold fell 0.2% to $1,206.55 an ounce at 11.10am GMT, having touched a one-month low of $1,203.36 earlier in the session. US gold futures edged 0.2% lower to $1,206.6 an ounce.

“The main driver has been some renewed dollar strengthening … due to political uncertainty in UK and Italy,” said Saxo Bank analyst Ole Hansen. “Gold is facing a bit of an uphill struggle due to the dollar strength.”

The metal posted its biggest weekly drop since August last week after the Fed reaffirmed its monetary tightening stance, seen as a negative for non-yielding bullion.

The dollar index, which measures the greenback against a basket of six major currencies, was up 0.5% on Monday.

The greenback benefited from a broader move away from riskier assets due to US-Sino trade tensions, China’s economic slowdown, Brexit uncertainty, and the standoff between Rome and the EU over Italy’s budget plan.

It was also underpinned by the Fed’s hawkish stance on interest rates.

The US central bank last week indicated it planned to raise rates next month and remained on track for two more potential hikes by mid-2019 on the back of an upbeat economy and rising wage pressures.

Higher US rates tend to boost the dollar and Treasury yields, adding pressure on greenback-denominated, non-yielding bullion.

“It seems like the bears are back in control,” a Hong Kong-based trader said. “It’s disappointing that every time gold starts to rally, it runs out of steam so fast.”

The precious metal has fallen more than 11% from its April peak, with investors piling into the dollar as the US-China trade war unfolded against a background of higher US interest rates.

Macquarie commodity strategist Matthew Turner said he expected gold to fall below $1,200 by the end of the year.

Meanwhile, hedge funds and money managers cut their net short position in gold by 8,136 contracts to 37,486 contracts in the week to November 6, data showed on Friday.

In other precious metals, silver was down 0.1% at $14.14 an ounce, having touched its lowest since September 18 at $14.06 in the previous session.

Palladium fell 0.9% to $1,106.22 an ounce, while platinum was flat at $848.99 an ounce.

Reuters

Source: businesslive.co.za