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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 [1]

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Alfonso Esparza

Alfonso Esparza [6]

Senior Currency Analyst at Market Pulse [7]
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
Alfonso Esparza

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