Gold Nears 8-Month Low as the Dollar Hits 4-year Highs


Gold Nears 8-Month Low as the Dollar Hits 4-year Highs

On Wednesday, gold dropped as the dollar rose to new highs after four years. Global shares rebounded and investors were cautious ahead of the release of US economic data scheduled for later this week.

Initially strong, spot gold dropped to a low of $1,216.55 per ounce before trading 0.2% lower at $1,220.25 per ounce, as reported by Reuters. It rebounded from the $1,208.36 low of the past session.

Futures for US gold dropped $0.70 at $1,221.30 per ounce.

Karim Cherif, analyst at Credit Suisse said, “A stronger dollar is a fairly consensus view as well as higher US Treasury yields. The Fed rhetoric lately has been helping as well, and for precious metals it means that the outlook remains poor.”

He added, “However, we are looking at support at $1,200/$1,180 and so far gold managed to hold above that. There is not going to be a massive drop ahead, and we can even say that prices are already factoring an initial Fed rate tightening.”

Investor interest in gold is still weak. The world’s leading gold-backed exchange traded fund, SPDR said that its holdings dropped to 773.45 tonnes by 1.2 tonnes on Tuesday, the lowest from Dec. 2008.

Q4 is a period where there is strong demand for gold from consumers in India and China as they purchase for weddings and festivals.

The demand for gold was not spurred by US strikes in Syria. The metal is normally seen as a safer choice in times of political tension, but the support from Ukraine and Middle East tensions has been of little impact.

Bloomberg reported Integrated Brokerage Services LLC head dealer, Frank McGhee as having said, “Barring some very temporary support from political turmoil, the sentiments remain very bearish. Gold will decline further, as it’s becoming more and more clear that rates are rising and inflation is not.”

Silver dropped 0.2% to $17.69 per ounce, platinum fell 0.4% to $1,319.75 while palladium rose 0.7% to $816.per ounce.

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