Gold declines to near 2-year low with focus on Fed’s rate hike

GOLD fell to near the lowest level in more than two years as the dollar strengthened, with investors weighing the likely size of the Federal Reserve’s looming interest-rate hike.

The greenback rose Tuesday (Sep 20) alongside inflation-adjusted Treasury yields, putting some pressure on bullion. The metal plunged below the US$1,700-an-ounce mark last week following hot inflation data that spurred some bets on a 100 basis point rate hike by the Fed.

Most economists see the central bank opting for a smaller 75 basis point increase, which will have largely been priced in by bullion traders. Other central banks including the Bank of England will also make rate decisions this week.

Investors are continuing to pare back their gold positions, with exchange-traded fund holdings down to the lowest since Jan 20. Physical buying from China appears strong, with total imports of non-monetary gold last month jumping to the highest since June 2018, according to data from the country’s customs administration.

For gold, “a further slide to the mid-US$1,500 an ounce level is possible,” UBS AG Wealth Management strategists including Wayne Gordon wrote in a note. “With 10-year US real yield expectations breaking above 1 per cent and a stronger US dollar, we see further outflows from ETFs and futures over coming months.”

Longer term, bullion enthusiasts at the annual Denver Gold Forum this week are optimistic. Prices will reach US$1,806.10 by year-end, according to the average estimate in a survey of 10 participants at the industry’s biggest annual gathering. The forecast is 7.8 per cent above Monday’s spot closing price, and the last time gold settled that high was at the beginning of July.

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Gold prices will fluctuate but unlikely to dip below US$1,500: traders

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Gold declined 0.5 per cent to US$1,667.42 an ounce by 1.25 pm in London. The Bloomberg Dollar Spot Index strengthened 0.3 per cent. Silver fell and palladium dropped 3.2 per cent, while platinum was up 1 per cent. BLOOMBERG