Gold prices sink to six-month low as investors sell holdings in physical market, dollar climbs

Higher interest rates would typically see investors divest gold, which earns nothing and costs money to store and insure.

Reuters June 22, 2018 12:48:27 IST
Gold prices sink to six-month low as investors sell holdings in physical market, dollar climbs

London: Gold prices sank to six-month lows on Thursday as investors sold holdings in the physical market and the dollar climbed due to expectations of higher interest rates in the United States.

Spot gold XAU was down 0.4 percent at $1,262.78 an ounce by 0917 GMT from an earlier $1,261.36, its lowest since 20 December. It has lost more than 7 percent since the April high above $1,365 an ounce. US gold futures GCcv1 were down 0.8 percent at $1,264.50 an ounce.

Holdings of the largest gold-backed exchange traded fund (ETF), the New York-listed SPDR Gold Trust have fallen nearly five percent to 26.645 million ounces since late April. That trend is reflected in other US based ETFs.

“Uncertainty would normally fuel demand for gold as a safe haven, which we would see in the physically backed products, but instead we are seeing outflows from the US products,” said Julius Baer analyst Carsten Menke.

“From the perspective of a US investor, focused on the domestic market and economy, the threat from trade tensions is much lower than in Europe. U.S. domestic consumption is a major driver of growth and there isn’t a problem there.”

Gold prices sink to sixmonth low as investors sell holdings in physical market dollar climbs

Representational image. Reuters.

That Menke said is why the Russell 2000 equity index , which comprises of small US-listed companies, and the Nasdaq NDX index of technology firms, are at record highs.

Meanwhile higher US interest rates and the prospect of further rises later this year have seen the dollar against a basket of other major currencies DXY climb to its highest since last July.

Higher interest rates would typically see investors divest gold, which earns nothing and costs money to store and insure.

A rising US currency makes dollar-denominated commodities more expensive for holders of other currencies, potentially subduing demand for metals. This relationship is used by funds to generate buy and sell signals using numerical models.

Analysts at ActivTrades agree the gold price drop is partly to do with the stronger dollar and say that $1,260 represents a first support level.

“If the decline continues, we would expect to see bullion testing the lows reached last December, near $1,240.”

Traders say the break of support at $1,265, a Fibonacci retracement level could mean further losses, but that momentum indicators suggested gold was oversold and that a correction was more likely.

Other precious metals too came under selling pressure.

Silver fell 0.6 percent to $16.17 an ounce, palladium XPD= lost 0.1 to $962.60 per ounce and platinum XPT= ceded 0.9 percent to $858.99 an ounce.

Updated Date:

also read

Gold prices fall by Rs 229, silver tumbles Rs 717 due to decline in global rates
Business

Gold prices fall by Rs 229, silver tumbles Rs 717 due to decline in global rates

In the international market, gold was trading lower at $1,832 per ounce, while silver remained flat at $27.38 per ounce

Gold, Silver Price Today: Precious metals get costlier; check Mumbai, Delhi, Chennai prices here
Business

Gold, Silver Price Today: Precious metals get costlier; check Mumbai, Delhi, Chennai prices here

The price of 22-carat gold in Delhi today is Rs 45,600 while 24-carat gold costs Rs 49,740 for 10 grams

Gold price today: Yellow metal dips day before Akshaya Tritiya; check price in Mumbai, Delhi, Chennai here
India

Gold price today: Yellow metal dips day before Akshaya Tritiya; check price in Mumbai, Delhi, Chennai here

Commodity experts have said that this dip in the gold prices is a good opportunity for buyers to purchase the precious yellow metal