Gold bars are displayed at GoldSilver Central’s office in Singapore. Picture: REUTERS
Gold bars are displayed at GoldSilver Central’s office in Singapore. Picture: REUTERS

London — Gold prices were on track for their fifth consecutive weekly fall on Friday as the dollar surged to its strongest in more than a year, making bullion more expensive for buyers using other currencies.

Investors rushed to the safety of the dollar as the Turkish lira collapsed as much as 14% on Friday to a record low; Russia’s rouble crumbled to a two-year low; and the euro and pound touched their weakest in a year.

With the turmoil in Turkey spreading to other markets, gold, traditionally used as a safe investment in times of uncertainty, also saw some extra interest, Saxo Bank analyst Ole Hansen said. But this was overpowered by the effect of the strong dollar, he added.

"There is a battle going on [in the gold marke] between the strengthening dollar and some safe-haven demand emerging from the contagion risk following the collapse of the lira."

Spot gold was down 0.2% at $1,210.15 an ounce at 9.45am GMT, with the dollar 0.5% stronger against a basket of major currencies. US gold futures were 0.2% lower at $1,217.90 an ounce.

Gold has tumbled more than 11% from an April high to a one-year low of $1,204 last week as the dollar rallied to 13-month highs and investors exited gold positions and began to speculate on lower prices. Holdings of gold at exchange-traded funds (ETFs) tracked by Reuters have fallen by 3.7-million ounces, or 6.3%, since late May to the lowest in almost a year.

Speculators have, meanwhile, expanded their net short position on the Comex exchange to the biggest ever recorded, helping to drive prices lower.

Adding to the pressure on gold are expectations that the US Federal Reserve will raise interest rates next month, bolstering the dollar and US bond yields and damaging the appeal of non-yielding gold.

If gold rises, investors could be forced to liquidate short positions, which would lift prices. But this is unlikely to happen until gold reaches around $1,230, according to Hansen. In the meantime, he said, "the bears are still in control".

Momentum indicators suggest prices will fall further, analysts at ScotiaMocatta said, with support at gold’s July 2017 low of $1,204.90.

Silver was down 0.3% at $15.36 an ounce, platinum was 0.2% higher at $831.70 an ounce and palladium had lost 0.5% to $902.25 an ounce. Silver and palladium were on track for small weekly losses, while platinum was up slightly on the week.

Reuters