Gold recovers, but fears of declines on the horizon
London — Gold prices recovered on Thursday from the more-than-one-week low they had reached overnight as a rally in both the dollar and equities ran out of steam, but the precious metal remained vulnerable to further declines.
The dollar index fell against a basket of major currencies, ending a four-session winning run after 10-year Treasury yields dipped 2 basis points as investors returned to the safety of bonds. Global stocks stumbled after setting a record high, with European shares tumbling by their most in almost two months after a batch of disappointing third-quarter results.
"There’s technical reasons why we’ve stabilised, stocks have come off, (but overall) people are not finding much value investing in gold at the moment," said Fawad Razaqzada, an analyst at FOREX.com
"The lack of safe-haven demand combined with expectations of higher interest rates is weighing. If gold remains below $1,300, there’s a risk of a deeper correction in the coming days or weeks."
Spot gold was up 0.5% to $1,287.39 an ounce in afternoon trading after earlier hitting its lowest since October 9 at $1,276.22. Gold has lost 6% since September 8.
US gold futures for December delivery rose 0.5% to $1,289.
The current term of Federal Reserve Chair Janet Yellen ends in February, and investors are waiting to see who US President Donald Trump will pick as her replacement. The White House said a decision would be announced in "coming days".
"Depending on how the dollar goes, we might look at $1,250-60 as the next stop for gold to trade down. We don’t see an immediate upward catalyst for gold except for North Korea," said Richard Xu, a fund manager at China’s biggest gold exchange-traded fund, HuaAn Gold.
Higher interest rates tend to boost the dollar and push up bond yields, putting pressure on gold by increasing the opportunity cost of holding non-yielding bullion.
US interest rates futures saw modest losses on Wednesday after the release of the Fed’s Beige Book, but traders still saw an 80% chance the Fed will raise rates in December.
"Looks like fundamentally the (US) economy is doing pretty well, so that will also put downward pressure on gold," Xu said.
Silver rose 0.4% to $17.05 an ounce, platinum rose 0.7% to $924.90 and palladium was flat at $952.90. Platinum and palladium hit one-week lows overnight.
Palladium rallied to a 16-year high this week and may spike further on rising auto sales in China and as consumers replace vehicles damaged by hurricanes in the US.