Gold futures extended last year’s decline as the dollar climbed to the highest in more than five years, curbing demand for the metal as a protection of wealth.
The U.S. currency climbed versus all its 16 major peers in 2014 and extended those gains today. European Central Bank President Mario Draghi said he can’t exclude the risk of deflation in the currency bloc and signaled that the likelihood of large-scale quantitative easing is increasing, according to an interview with German newspaper Handelsblatt.
“The stronger dollar is clearly a negative,” Nic Brown, the head of commodities research at Natixis SA in London, said by phone. “We have the potential for further dollar strength as the market is looking for the Fed to start hiking rates mid-year and as other central banks continue to expand balance sheets.”
Gold for February delivery fell 1.2 percent to $1,169.40 an ounce by 8:35 a.m. on the Comex in New York. Prices reached the lowest since Dec. 1 and are set for a third week of losses. The metal for immediate delivery slipped 0.9 percent to $1,171.08 in London, according to Bloomberg generic pricing.
Trading volume was 42 percent below the 100-day average for this time of day, data compiled by Bloomberg show. In a Bloomberg survey of nine traders and analysts, seven were bullish on prices for next week.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.