Gold at 5-week low, falling for the 6th day in a row

PUBLISHED : Friday, 10 March, 2017, 4:41am
UPDATED : Friday, 10 March, 2017, 5:23am

Gold fell for the sixth straight session and reached a five-week low on Thursday, with analysts expecting further losses as investors become increasingly certain that US interest rates will rise this month.

Spot gold was down 0.5 per cent at US$1,202.11 an ounce on Thursday, after dropping to US$1,201.02, its weakest since February 1. US gold futures settled down 0.5 per cent at US$1,203.20.

Strong US economic data and comments by Federal Reserve officials have reinforced expectations of a March US rate hike.

With the Fed on the rate rise trail, what path for the dollar?

Higher interest rates typically pressure gold prices because they raise the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.

“You could see the price continuing to drop as more news comes out confirming what the market already knows,” said Bernard Dahdah, metals analyst at Natixis. “I wouldn’t be surprised to see gold drop below US$1,200 in the next few days.”

February’s US private sector job growth numbers, released on Wednesday, showed the biggest jump for more than a year.

Investors are awaiting non-farm payrolls data on Friday for further clues on the strength of the US economy after Federal Reserve Chair Janet Yellen said last week that the central bank was poised to lift rates, provided that jobs and inflation data held up.

Her comments were seen as cementing plans for an increase at the Fed’s March 14-15 meeting.

“If the (non-farm payroll) data does come in better than market expectations, it will drag gold prices further,” said OCBC analyst Barnabas Gan. “But with fund futures fully pricing in the rate hike story, I’d presume gold will just be supported at the US$1,200 handle into next week.”

Interest rate futures implied that traders had put the chance of a rate hike next week at 86 per cent on Wednesday, compared with 82 per cent at Tuesday’s close, according to CME Group’s FedWatch programme.

“In gold, fundamentals on balance indicate a moderate short position,” UBS Chief Investment Office Wealth Management said in a note. “In additional to our short model position, we have a long gold position under macro-scenario trades, resulting in an overall net long gold position.”

In other precious metals, silver fell 1.6 per cent to US$16.95 an ounce, having touched US$16.91, the lowest since January 27. Platinum dropped 0.9 per cent to US$935.90 after hitting a low of US$929.25, the weakest since January 4, while palladium slid 2.8 per cent to US$747.20, after falling to US$744.60, its lowest since February 6.