On Friday, gold dropped to below $1,200 per ounce for the first time in 2014 while the dollar jumped on better than projected non-farm payroll data in the United States, which could make the Federal Reserve to hike interest rates earlier than mid 2015.
Spot gold dropped 1.3% to the lowest price from December 31 to trade at $1,197.06 per ounce. US gold futures declined to $1,196.30 per ounce.
Reuters quoted Afshin Nabavi, MKS SA head of trading as having said, “The move in the dollar has been quite drastic after the good US non-farm payrolls number, and we came down below $1,200, and there is a good possibility that we’ll go some $10-$20 lower over the next few hours.”
He added that the lower prices will be seen by the Indian and Chinese markets next week as a chance to buy, which could mean that gold would get support from Asia’s physical demand.
Against the basket of currencies, the dollar gained more than 1%, the highest in over four years and is on track for the 12th week of gains.
Gold has benefited from increased liquidity of central banks and low rates. Increase in rates will discourage investment in bullion, which is an asset that does not bear interest.
Georgette Boele, an analyst at ABN Amro said, ‘What causes the big swings in precious metals is what investors are doing, and if the dollar is strong and US yields are higher, then gold becomes one of the least attractive assets for them because it holds no coupon.”
The Wall Street Journal quoted Archer Financial Services LLC senior market strategist, Adam Klopfenstein as having said, “This is just another sign that the metals trade is over. The inevitable trend for gold is lower, and it’s a long drop from here.”
Silver was 1.1% down at $16.88 per ounce while palladium dropped 0.6% at $760.25 per ounce.
To register for a free 2-week subscription to ForexMinute Premium Plan,
To contact the reporter of the story: Jonathan Millet at