Gold Rout Continues As US Economy Marches On

Gold futures fell for a ninth time in 10 sessions as investors seek higher-yielding assets amid a rout that wiped out the metal’s gains this year.

Assets in the SPDR Gold Trust, the world’s biggest exchange-traded product backed by the metal, dropped for five straight sessions, the longest slump in almost a year. The holdings are at the lowest since September 2008. The Standard & Poor’s 500 Index of shares rose to a record today before trading little changed, and the dollar traded near a five-year high against a basket of 10 currencies.

Bullion dropped 3.8 percent this year, set for a second annual loss and the longest slide since 1998. Signs of a stronger U.S. economy drove the dollar higher and fueled speculation that the Federal Reserve is moving closer to raising interest rates after ending its bond-buying program. Higher borrowing costs cut the allure of the metal which generally offers investors returns through rising prices.

“For gold, there’s nothing there – no geopolitical risk premium, no quantitative easing to back it in the U.S.,” Phil Streible, a senior commodity broker at RJO Futures in Chicago, said in a telephone interview. “The thoughts of higher interest rates are amongst us.”

Gold futures for December delivery fell 0.5 percent to $1,154 an ounce at 10:20 a.m. on the Comex in New York. On Nov. 7, prices reached $1,130.40, the lowest since April 2010.

The metal declined as “traders are working to start to diversify,” including into Chinese-related investments, Streible said. Money managers including BlackRock Inc. registered almost 40 exchange-traded funds tracking China’s domestic shares and debt with U.S. regulators.

Holdings in global bullion ETPs fell 1.9 metric tons to 1,624.9 tons yesterday, extending a slide the lowest since August 2009, data compiled by Bloomberg show. Speculators cut their net-long position in New York futures and options by the most this year in the week ended Nov. 4, with short wagers rising for the first time in a month, U.S. government data show.

via Bloomberg

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