Gold sank to the lowest level in more than five years, Silver and platinum dropped to multiyear lows
Gold Drops as Top Bullion Forecaster Says Rate Rise Near Certain
- Fed Chair Janet Yellen signals her confidence in U.S. economy
- Holdings in SPDR shrink by most since 2011 as dollar climbs
Gold sank to the lowest level in more than five years after Federal Reserve Chair Janet Yellen signaled her confidence in the U.S. economy, the dollar rose and investors’ holdings contracted. Silver and platinum dropped to multiyear lows.
“It’s almost a certainty that the Fed is going to raise rates,”said Barnabas Gan, an economist at Singapore-based Oversea-Chinese Banking Corp., who’s the most-accurate gold forecaster according to Bloomberg rankings. “The higher interest rates will spell a stronger dollar and the stronger dollar will spell weaker gold prices,” Gan said in an interview.
Bullion for immediate delivery lost as much as 0.7 percent to $1,046.44 an ounce, the lowest since February 2010, and was at $1,052.51 at 3:37 p.m. in Singapore, according to Bloomberg generic pricing. Silver fell as much as 1.2 percent to $13.8423 an ounce, the lowest price since August 2009, as platinum sank to the lowest since December 2008.
Precious metals are in retreat as an improving U.S. economy enables U.S. central bankers to prepare the way to the first rate increase in almost a decade at the same time that their European counterparts may add stimulus. Yellen said Wednesday that waiting too long to end the era of near-zero interest rates could force the central bank to tighten too quickly, which would risk disrupting markets. Gan, the most accurate forecaster in the third quarter, said he’s sticking to his forecast for gold prices to decline further in 2016.
‘Driving Force’
“Yellen’s speech reinforced market expectations regarding the December rate hike and was the driving force behind the weakness in the precious metals and broader commodities,” Jordan Eliseo, chief economist at trader Australian Bullion Co. in Sydney, said by e-mail. “We see a rate hike as fully priced in.”
Expectations of higher borrowing costs have cut the appeal of gold as it doesn’t pay interest, pushing the metal down 11 percent this year. The dollar traded near the strongest in more than a decade on Thursday. Holdings in the SPDR Gold Trust, the largest exchange-traded product backed by the metal, dropped 2.4 percent on Wednesday to 639.02 metric tons, data on the fund’s website show. That’s the biggest tumble since January 2011. Assets are at the lowest since September 2008.
A report Wednesday from ADP Research Institute showed U.S. companies added more workers in November than forecast. The figures, which precede official jobs data on Friday, signal a strengthening labor market. There’s a 74 percent chance the Fed will increase rates at its Dec. 15-16 meeting, futures show.
European Central Bank President Mario Draghi signaled in October that policy makers are open to boosting stimulus when they meet later Thursday, after embarking on a 1.1 trillion euros ($1.2 trillion) asset-purchase program in March.
Source: Bloomberg – Gold Drops as Top Bullion Forecaster Says Rate Rise Near Certain
