Gold slips to near six-year low

GOLD has risen one per cent, recovering from near six-year lows as news that Turkish fighter jets had shot down a Russian warplane near the Syrian border sparked a rush to safety among investors, weighing on the USA dollar.

“We haven’t seen the dollar at these levels for a very, very long time”, Bart Melek, the head of commodity strategy at TD Securities in Toronto, said in a telephone interview. A rebound in the dollar, which rose 0.4 percent against a basket of currencies, weighed on dollar-denominated gold, making it more expensive for foreign currency holders. The data add to signs the economy may be strong enough to withstand higher rates, which damp the appeal of gold because it doesn’t pay interest, unlike competing assets. Because with the broad commodity complex implying “fair value” in gold at $675 per ounce, this ratio “won’t be satisfied until gold touches that 2008 low”. Higher rates would rise the opportunity cost of holding non-yielding gold and could dent demand and boost the greenback.

Bullion for immediate delivery dropped 1.5 percent to $1,056.48 an ounce by 1:39 p.m.in London, according to Bloomberg generic pricing.

This month, he said that he believes that a December rate hike is the less likely outcome of the Fed’s December meeting, but that either outcome is bullish for gold! The Federal Reserve is widely expected to raise U.S. rates for the first time in almost a decade when it meets next on December 15-16.

“And, although entering a mature phase, the dollar appreciation cycle is not done yet, and that will also be a negative driver for gold”.

“The dollar index is within reach of the multi-year high of 100.39”.

The fundamental picture is also bearish – Indian gold demand could fall to an eight-year low of 150-175 tonnes in the fourth quarter, the All India Gems & Jewellery Trade Federation estimated.

‘The Turkey-Russia tension has only had a limited impact and now gold is back on its downward trend mainly due to the dollar and rate hike expectations, ‘ Commerzbank analyst Daniel Briesemann said.

In other metals trade, December palladium rose $9.80, or 1.8%, to close at $551.30 an ounce, while December platinum rose $2.20, or 0.2%, to $843.90 an ounce.