London: Gold, trading near the lowest in more than five years on expectations that the Federal Reserve will soon raise interest rates, gained for the first time in three days as Turkey said it shot down a Russian fighter jet close to the Syrian border.
Bullion rose as much as 0.6 per cent in London. The aircraft was warned after violating Turkish airspace and was then downed in line with Turkey’s rules of engagement, the state-run Anadolu Agency reported, citing officials at the presidency. Russia’s Defense Ministry denied that the aircraft had ever left Syrian airspace, while acknowledging that one of its jets had crashed in the country.
Gold touched a five-year low last week traders increased bets that US policymakers will raise borrowing costs, with the chances of a move next month seen at 72 per cent, data compiled by Bloomberg show. That cuts the appeal of precious metals because they don’t give returns like other assets such as stocks or bonds. In a letter released Monday, Fed Chair Janet Yellen repeated that she expects to tighten policy “gradually” after lift-off.
“The recent strength in the US job market and inflation data have further mounted the case that the US economy is sufficiently resilient to withstand a rate hike,” Vyanne Lai, an economist at National Australia Bank Ltd. in Melbourne, said by email. “Gold prices are hunkering down for the imminent US Fed Funds rate lift-off.”
Gold Price
Gold for immediate delivery added 0.5 per cent to $1,074.09 an ounce by 9:19am in London, according to Bloomberg generic pricing. Prices fell to $1,064.55 on Nov. 18, the lowest since February 2010.
Repeating that she and most of her colleagues expect the pace of policy tightening to be gradual, Yellen said “overly aggressive” rate hikes could also undercut the economic expansion and force the Fed to reverse course back to zero. Yellen was responding to a letter calling for higher interest rates on behalf of savers.
Holdings in gold-backed exchange traded products fell 6.6 metric tons, the most in more than two weeks, to 1,495.1 tons as of Monday, data compiled by Bloomberg show. Assets are at the lowest since February 2009.
Platinum was down 0.2 per cent at $843.41 an ounce after earlier dropping as much as 1.1 per cent to the lowest in almost seven years. The metal looks oversold, Ivan Szpakowski, a commodities strategist at Citigroup Inc., said in a Bloomberg Television interview. Platinum’s 14-day relative-strength index has been below 30 since Nov. 9, a sign to some traders that prices may be poised to rebound.
Palladium lost 0.4 per cent and silver added 0.3 per cent.
