Gold dropped from its highest in a month on Friday, giving back some of its sharp overnight gains, as the dollar rallied on an assurance from Federal Reserve chair Janet Yellen that the USA central bank would begin raising rates this year. Gold prices were also falling because the stronger dollar is weighing it down, and even Platinum fell to a six-and-a-half-year low.
In afternoon dealings on the Comex market in New York, gold futures with December delivery dates lost $4.90 to $1,132.90 an ounce in quiet trade, not far off three-week highs reached Friday. The Financial Times says she outlined a “prudent strategy” of an initial raise this year and gradual tightening thereafter – and warned that holding rates too low for too long “could encourage excessive leverage and other forms of inappropriate risk-taking”. It fell to $924.50 earlier this week, its lowest since January 2009. But several Fed officials have since said they would still like to raise interest rates this year, placing a cap on gold’s rally that won’t go quickly.
According to the CFTC’s weekly Commitment of Traders data for the week to September 15 large speculators on Comex – referred to as “managed money” – slashed net bullish positions by 75% to a mere 686,000 ounces.
Gold prices have frozen holding near their price after the Fed announcement this past Thursday. “Probably not in October, but December is still quite possible”.
Coupled with uncertainty in China that should add to the allure of gold, a traditional safe haven, this could point to at least a modest recovery, some say.
Spot palladium logged a near 7 percent jump in the previous session.
European shares climbed zero.6 % on Monday, whereas the greenback rose towards a basket of currencies after hypothesis that different main central banks might ease coverage after the Federal Reserve delayed an rate of interest hike. So look for gold to continue going up and down for the next few weeks as investors still wonder when the interest rates will go up and how that affects other commodities. “$US900 could be tested, maybe a little bit lower“, ABN Amro analyst Georgette Boele said.