Gold fell to the lowest level since January, set for the biggest monthly decline in 15, on the outlook for higher U.S. interest rates that strengthened the dollar. Silver dropped to the lowest in four years.
Gold retreated 6.3 percent in September, the most since June 2013. It’s within 0.4 percent of erasing this year’s gains, which were fueled partly by tensions in Ukraine and the Middle East. The dollar has climbed amid improving U.S. economic data and as the Federal Reserve raised interest-rate forecasts, while central banks in Europe and Asia maintained or expanded stimulus to spur economic growth.
Higher interest rates reduce gold’s allure because the metal only offers investors returns through price gains, while a stronger dollar typically cuts demand for a store of value. The Bloomberg Dollar Spot Index reached a four-year high today and is set for the largest quarterly increase since 2008. Bullion prices near $1,200 an ounce may draw more physical demand, UBS AG wrote in a report today.
“The divergence in monetary policies between the Fed and other central banks will further push up the dollar and weigh on gold,” Zhu Runyu, an analyst at CITICS Futures Co., a unit of China’s biggest listed brokerage, wrote in an e-mail today. “As geopolitical tensions fade, gold has also lost a key price support this year.”
Gold for December delivery slid 1 percent to $1,206.60 on the Comex in New York by 7:39 a.m. It reached $1,204.30 earlier today, the lowest since Jan. 2, and is set for an 8.7 percent drop this quarter. Gold for immediate delivery fell 0.8 percent to $1,206.39 in London, according to Bloomberg generic pricing.
Trading Volume
Futures trading volume was 30 percent higher than the average for the past 100 days for this time of day, data compiled by Bloomberg show.
There is a 55 percent chance the Fed will raise its benchmark interest-rate target to at least 0.5 percent by July 2015, futures trading shows.
“There is a general expectation that prices close to or below $1,200 will draw a greater reaction from physical buyers and opportune investors,” UBS wrote in the note, after visiting Asia last week. “A rush to physical will not take hold, not unless prices fall closer to $1,100. Some thought further modest declines were possible, while others felt the market had found a bottom and should be supported around these levels.”
In China, volumes for the benchmark spot contract on the Shanghai Gold Exchange fell today after reaching a 17-month high yesterday. The week-long Golden Week holiday in China starts tomorrow.
Silver for delivery in December dropped 2 percent to $17.21 an ounce in New York. It touched $17.08, the lowest since May 2010, and slid 18 percent this quarter.
Palladium for December delivery slid 1.6 percent to $777.25 an ounce, reaching $775.50, the lowest since April 21. It’s dropped 15 percent this month, the most since September 2011.
Platinum for January delivery lost 0.5 percent to $1,302.90 an ounce, after reaching $1,296.50 yesterday, the lowest since June 2013. It’s down 12 percent this quarter, the most in more than a year.
To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net
To contact the editors responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net John Deane, Nicholas Larkin
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