Gold Barely in the Black in 2014 As Rate Outlook Slows Demand

Gold traded little changed in London, with the metal almost erasing this year’s gains as the outlook for higher U.S. interest rates amid an improving economy curbs demand for the metal.

Bullion rose as much as 0.7 percent earlier today as European equities declined and the Bloomberg Dollar Spot Index fell after climbing to a four-year high yesterday. Gold retreated this week to the lowest in almost nine months.

Rising interest rates reduce gold’s allure because the metal generally only offers investors returns through price gains, while a stronger dollar typically cuts demand for a store of value. While money managers are holding their smallest bullish bet since January, the metal’s drop has taken it near a technical level that suggests prices may be poised to rebound. Gold coin sales advanced last month in the U.S. and Australia.

“The stronger U.S. macro outlook is driving expectations for a U.S. interest rate hike, which is supporting the dollar” and hurting gold, David Wilson, an analyst at Citigroup Inc. in London, said today by phone. “You’d expect to see some bargain hunting at these lower prices, but whether that will be truly supportive is hard to say.”

Gold for immediate delivery lost 0.2 percent to $1,211.34 an ounce by 1:25 p.m. in London, according to Bloomberg generic pricing. It reached $1,204.57 on Sept. 30, the lowest since Jan. 2, and is up 0.8 percent this year. Gold for December delivery fell 0.2 percent to $1,212.50 on the Comex in New York.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza