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Gold heading for worst weekly run of the year

Increasing rates are ‘bad news’ for the market, Takai says.

Gold has taken a relentless battering.

Prices are poised to drop for a fourth week, the worst streak of losses this year, on prospects for higher US interest rates, a rising dollar, a strong American economy and record equity markets. Fears over a potential nuclear conflict with North Korea have cooled too, reducing demand for a haven.

Bullion  traded at $1,268.34 an ounce on Friday, just above a low of $1,266.64 hit a day earlier, which was the weakest level in almost two months. Prices have succumbed to the latest barrage of hawkish comments from Federal Reserve officials, and better-than-forecast American factory orders, before monthly nonfarm payrolls data land later on Friday.

“The environment is now heading toward rising interest rates, which is bad news for the gold market,” Bob Takai, chief executive officer of Sumitomo Corp. Global Research Co., said by phone from Tokyo.

Prices have slumped more than 6% from a one-year high in early September. Fed funds futures now indicate about a 73% chance of a December rate hike after Fed Bank of San Francisco President John Williams said moderate growth and his outlook for higher inflation will allow the US central bank to raise interest rates, while his counterpart in Philadelphia Patrick Harker signalled he’s anticipating an increase at the end of the year.

Investors will be watching the payroll and unemployment data from the US later, according to Brian Lan, managing director of Singapore-based GoldSilver Central Pte. Gold is also floundering on lack of support from Chinese markets during the week-long national holiday and dollar strength, he said by email. The Bloomberg Dollar Spot Index is near the highest in almost three months.

In other precious metals:

  • Spot silver traded at $16.6123 an ounce, heading for fourth weekly drop
  • Platinum’s up 0.4 percent this week to $915.78 an ounce, snapping three weeks of declines
  • Palladium at $939.96 an ounce is poised for second weekly gain

© 2017 Bloomberg

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