Gold slumps to four-month low
London — Gold slid to its lowest in four months on Thursday as a bounce in the dollar sparked by optimism over US tax reform plans pushed the metal out of its recent narrow trading range.
The metal had been hemmed between $1,265/oz and $1,300/oz since mid-October as a series of record highs in stock markets detracted investment interest from bullion, and as traders awaited an expected US interest rate increase this month. It broke out of that range this week, extending losses after slipping below its 200-day moving average at $1,267/oz.
Spot gold was down 0.6% at $1,255.85/oz at 10.55am GMT, off an earlier four-month low of $1,254.51. US gold futures for December delivery were down $8.20/oz at $1,257.90.
"We’ve had a [breakdown] of support at $1,260, which is a key level," ActivTrades chief analyst Carlo Alberto de Casa said. "From a technical point of view, many traders had stop-losses just below $1,262, and today the market is going down for this reason."
Strength in the dollar was feeding into this, he said. "The fact that the US dollar is recovering isn’t very welcome for the commodities market."
The dollar touched a two-week high on Thursday on optimism that the US would successfully push through tax reforms, while world shares rebounded after two consecutive days of losses.
US Senate Republicans agreed on Wednesday to talks with the House of Representatives on sweeping tax legislation, raising the hope that legislators could agree on a final bill ahead of a December 22 deadline.
Gold is now awaiting further direction from US nonfarm payrolls data later this week, a key barometer for the health of the US economy. Next week the Federal Reserve is also expected to announce another US interest rate increase, and to guide on the pace of further increases.
Gold is highly sensitive to rising US rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
"Both the fundamentals and the technicals in gold look somewhat bearish at the moment, and we suspect that we could move slightly lower heading into next week’s critical Federal Reserve meeting," INTL FCStone analyst Ed Meir said.
Among other precious metals, silver was down 0.4% at $15.90/oz after earlier slipping to its lowest since mid-July at $15.82.
Platinum was 0.3% lower at $898.65/oz, after earlier having hit its lowest since July 11 at $893. The metal has fallen nearly 5% this week, putting it on track for its biggest weekly loss in nine months.
Palladium was up 0.3% to $996/oz.