Gold extends weakness after worst month in 2 years

Analysts expect gold to rebound only after the U.S. Federal Reserve makes a decision on interest rates. The metal had lost 6.4 per cent so far in July, its steepest decline since June 2013. Investor confidence was shaken last week with when bullion prices tumbled to a five-and-a-half-year low of $US1,077 on July 24.

Gold steadied not far above a 5-1/2-year low on Monday, struggling to scale higher at the start of the month after its deepest loss in two years in July, as expectations for a near-term hike in US interest rates kept sellers nearby.

US gold for December delivery slipped 0.1 per cent to US$1,093.60 an ounce.

“The dollar is back on the ascendant today, weighing on all commodity prices”, Mitsubishi Corp analyst Jonathan Butler said.

U.S. private employers hired 185,000 workers in July, the smallest increase since April, according to a payrolls processor on Wednesday, reducing expectations of a strong jobs reading in the government’s payrolls report due on Friday. But being above 50 shows the U.S. manufacturing sector continues to expand.

“Considering that the US economy is recovering and that we will likely see a decent US employment data throughout the summer, selling gold rallies any time gold shoots above $US1,100 an ounce seems like an appropriate trading strategy for now”, Bart Melek, head of commodities strategy at TD Securities, said in a note to clients. Figures had shown a second-quarter improvement in US economic growth on Thursday, which led investors to increase bets the Federal Reserve was on track to raise interest rates, possibly at its next meeting in September.

Hedge funds trading Comex gold futures and options meantime held more bearish than bullish contracts as a group overall last week, extending their first such “net bearish position” since current records began in 2006.

Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, dropped further on Tuesday to 21.56 million ounces, the lowest since September 2008.

Spot silver XAG= eased 0.5 percent to $14.70 an ounce. If the dollar goes up, gold futures will fall as gold, measured by the dollar, becomes more expensive for investors.

Platinum fell to a six-year low and palladium reached the lowest level since 2012 on speculation that supplies are ample amid slowing demand from China. Palladium gained 1.7 percent to $619.25 an ounce.