Gold traded near a four-year low on speculation the dollar will keep strengthening as the Federal Reserve considers raising interest rates, while other central banks add stimulus.
While the Fed ended its bond-buying program last month and is now weighing the timing of interest-rate increases, the Bank of Japan on Oct. 31 raised its annual target for enlarging the monetary base to 80 trillion yen ($710 billion) a year, up from a previous 60 trillion yen to 70 trillion yen. The Bloomberg Dollar Spot Index was set for the highest close since June 2010.
Gold capped the first back-to-back monthly decline of 2014 last week after dropping to $1,160.50 an ounce, the lowest price since July 2010. Rising rates reduce gold’s allure because the metal generally offers investors returns only through price gains, while a stronger dollar typically cuts demand for a store of value. Societe Generale SA and Goldman Sachs Group Inc. are among banks expecting further losses for gold. A technical gauge indicated prices may have dropped to fast.
“The prospect of firmer rates, coupled with our expectation for a stronger dollar, present significant headwinds for gold and are likely to skew risks to the downside,” Barclays Plc analysts including New York-based Suki Cooper said in a report today. “In the near term, physical buying is likely to offer some support on the downside.”
Gold for December delivery slipped 0.1 percent to $1,170.60 an ounce by 7:55 a.m. on the Comex in New York. Prices declined as much as 0.9 percent to $1,161 earlier today, before rebounding. Bullion for immediate delivery retreated 0.2 percent to $1,170.99 in London, according to Bloomberg generic pricing.