London/Singapore: Gold headed for its biggest monthly drop in more than two years on prospects for a stronger dollar as monetary policy diverges between the US and Europe. Platinum slipped to a seven-year low.
Bullion is near the lowest in five years on expectations that the Federal Reserve will raise interest rates for the first time since 2006 next month. The dollar has also strengthened against the euro as analysts predict the European Central Bank will unveil additional stimulus this week. The metal typically trades inversely to the US currency.
Higher US borrowing costs boost the appeal of the dollar and curb demand for precious metals because they don’t give returns like other assets such as bonds or equities. Gold is on course for a third straight annual decline and investors are holding the least through bullion-backed exchange-traded products since 2009.
“We find ourselves at multi-year lows with no real sign of recovery,” David Govett, head of precious metals at broker Marex Spectron Group in London, said by email. “There is some physical demand around here, but nothing like the amount needed to stage a comeback in gold prices.”
Gold price
Bullion for immediate delivery lost 0.1 per cent to $1,056.25 an ounce by 10.40am in London, according to Bloomberg generic pricing. Prices, which touched a five-year low of $1,052.83 on Friday, have retreated 7.5 per cent this month, the most since June 2013.
Non-farm US payrolls data later this week will help to shape policy makers’ decision on when to start raising rates. Fed Chair Janet Yellen is scheduled to appear before Congress this week and her comments will be scrutinised for clues on the timing of rate increases. Odds of a move at the Fed’s December 15-16 meeting are 74 per cent, Fed-fund futures data show.
“Greenback strength is clearly not friendly to gold prices,” said Bernard Aw, a strategist at IG Asia Pte in Singapore. “Certainly the nonfarm payrolls data this Friday will be closely watched too, given that it is the last jobs data” before policy makers meet, he said.
Platinum dropped as much as 1.2 per cent to $825.65 an ounce, the lowest since December 2008, and was last down 0.9 per cent. Palladium retreated 0.5 per cent, while silver was little changed.
