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Gold climbs on firmer oil, but heads for third annual decline

Gold and silver climbed on the first trading day of 2016 as rising tension between Saudi Arabia and Iran spurred a return to haven assets.

[LONDON] Gold edged up on Tuesday in response to firmer oil prices, but a rebound in the dollar limited upside momentum for the metal, which appeared poised for a third year of losses amid the prospect of rising US interest rates.

Gold is likely to end 2015 down nearly 10 per cent, mostly due to expectations that higher US rates will hit demand for the non-interest-paying metal.

Spot gold was up 0.02 per cent to US$1,069.6 an ounce at 2:17 p.m. EDT (1917 GMT), after losing 0.6 per cent in the previous session. Volumes were thin during the last trading week of the year.

US gold futures for February delivery settled at US$1,068.0 an ounce, little changed from the previous day's close of US$1,068.3. "Conditions (should) remain fairly quiet into the year end, with gold tracking a US$1,060-1,085 range, in lieu of limited data and a number of traders still on holidays," MKS PAMP senior dealer Alex Thorndike said.

The dollar, weaker initially, rebounded 0.3 per cent against a basket of leading currencies, after US data showed higher-than-expected consumer confidence in December.

Separately, data also showed US single-family home prices rose in October at a slightly faster pace than in September and above market expectations.

The US currency will continue to be the main driver for gold, analysts said.

Aided by an improving US economy, the Federal Reserve raised rates for the first time in nearly a decade this month and hinted at further gradual increases in 2016.

Global benchmark Brent crude steadied above 11-year lows but gains could be limited by persisting near-record output.

Assets of SPDR Gold Trust, the top gold-backed exchange-traded fund, fell 0.18 per cent to 643.56 tonnes on Monday, close to a seven-year low.

Speculators' short positions in COMEX gold contracts are near an all-time high, though data on Monday showed they had reduced the record bearish stance in the week to Dec 22.

The technical picture also looked weak.

A breach of US$1,067 an ounce could send the metal all the way to a multi-year low of US$1,048, ScotiaMocatta said in a note.

Silver rose 0.7 per cent to US$14.03 an ounce, but was heading for an 11 per cent yearly fall, while palladium gained 0.85 per cent to US$556.75 an ounce and platinum rose 1.14 per cent to US$889.55 an ounce.