Gold keeps gains from 2-day rally, but oil slump a worry

Stronger European shares and a renewed slump in crude oil prices, which hit levels unseen since 2004, curbed gold’s ascent. Bullion is often seen as a hedge against oil-led inflation.

Gold has had a bumpy 2015 as investors tried to gauge the timing of the Fed’s rate rise.

Spot gold was little changed at $1,077.80 an ounce by 0335 GMT, after gaining 2.5 per cent in the last two sessions.

In the week ahead, trading volumes are expected to remain light due to the Christmas holiday and as many traders already closed books before the end of the year, reducing liquidity in the market and increasing volatility.

But the outlook for the dollar is bullish as the Fed is set to hike rates further next year. “We are targeting $980 for the fourth quarter next year”. Some traders have speculated that prices could be near a bottom because the metal is trading near its cost of production, with futures dropping 10 percent this year.

“The best the gold market can hope for [in] 2016”, Kendall goes on, “is that in US Dollar terms the metal has now found equilibrium, with jewellery, physical investment and central bank demand able to absorb mine supply, scrap and a diminished pace of liquidation from (primarily) US investors”. On Friday, gold rallied 1.47%, or $15.40.

Gold’s Friday move followed a 2-percent loss in the session prior to that, the metal’s biggest single day loss in five months, as the Federal Reserve raised U.S. interest rates for the first time in almost a decade. That sent gold to $1,047.25 in the previous session, close to a near-six-year low.

Gold futures marked their highest settlement in about two weeks as some softness in the dollar and a lack of any significant economic data offered the metal a lift. The metal could revisit $1,000 an ounce for the first time in six years if it breaks below its early December low at $1,045 an ounce, according to technical analysts.

Assets in SPDR Gold Trust, the world’s top gold-backed exchange-traded fund, fell 0.70 percent to 630.17 tonnes on Thursday, the lowest since September 2008.

Silver rose 0.6 percent to $14.21 an ounce, while palladium was up 0.1 percent at $558.27 an ounce and platinum gained 0.4 percent at $861.96.