Gold falls further as SPDR fund holdings hit fresh 6-year low

Reuters Singapore | Updated on January 24, 2018


Gold added to overnight losses on Thursday as strength in the dollar and equities plus robust US economic data reduced the metal’s appeal as a hedge, triggering further outflows from the top bullion-backed fund.

Spot gold eased 0.2 per cent to $1,207.75 an ounce by 0336 GMT.

The metal fell 0.7 per cent in the previous session, ending a three-day winning streak.

Political crisis in Greece

Gold had climbed to a three-week high of $1,222.40 earlier this week as global equities fell on concern over political developments in Greece that could see it leaving the euro zone. But equities have regained some strength due to better US data and a halt, for now, to the slide in oil prices.

“We are calling for a $1,000-$1,350 trading range for gold in 2015, with the downside being reached if equity markets do well and if the dollar remains on an upside trajectory,’’ said INTL FCStone analyst Edward Meir.

Gold is unlikely to get much support from investment flows this year, Meir said, adding that gold prices could go higher if there was a sizeable correction in equities.

Holdings in SPDR Gold Trust

In a reflection of investor sentiment, holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.42 per cent to 704.83 tonnes on Wednesday, their lowest since late 2008. Flows in and out of the fund tend to influence prices due to the size of its holdings.

Weighing on demand for gold was data on Wednesday that showed the US trade deficit fell to an 11-month low in November and private employers stepped up hiring last month.

A robust economy reduces gold’s safe-haven appeal and could prompt the Federal Reserve to raise interest rates soon, dampening the demand for non-interest-bearing bullion.

The strength in the dollar, which is hovering near a nine-year peak against a basket of major currencies, could also hurt gold.

US payrolls data

Traders were waiting for US payrolls data later this week for more clues about the economy and its potential impact on the Fed’s monetary policy.

Moves in oil prices, which slumped to five-year lows this week, were also on the radar. Brent held above $51 a barrel on Thursday after an unexpected fall in US crude stocks snapped a four-session decline the previous day.

Gold and oil often trade in similar directions, with demand for bullion as an inflation hedge falling as a drop in oil prices reduces inflationary pressure.

But gold prices are currently at their highest level relative to oil since the late 1990s as bullion retains some of its appeal despite the downward spiral in crude amid rising supplies and lacklustre demand.

Published on January 08, 2015

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