Gold rebounds on flight to safety as Paris attacks hit shares

Gold prices tumbled to their lowest level in more than five years Tuesday as the dollar strengthened and investors increasingly anticipate a USA interest rate increase before the end of the year. Spot gold was down 1 per cent at $1,071.96 an ounce at 3:19 p.m. EST (2019 GMT), after falling to $1,065.18, the lowest since February 2010. But this role has been surpassed in the past year as investors focus, nearly exclusively, on the timing of an interest rate rise by the U.S. Federal Reserve.

The ICE U.S. Dollar Index, drawing further interest away from gold.

Turning to wider markets, Germany’s DAX and France’s CAC-40 were up 1.9 percent and 2.4 percent respectively. “The euro’s on the defensive, the equity markets have done okay and (there are) expectations of a rate rise”, said James Steel, chief metals analyst at HSBC Securities in NY.

Following the incident, gold prices for December futures contract at the Comex division of the NY Mercantile Exchange touched the highest level of $1,097.40 per ounce on November 16 and reached the settlement price of $1,083.60 per ounce, up 0.2% from November 13.

Gold jumped 1 percent on Monday, moving away from a near-six-year low, as investors sought safety in the metal following Friday’s deadly attacks in Paris.

Meanwhile, an October reading of consumer prices released early Tuesday showed its, rising by a seasonally adjusted 0.2% last month, in line with economists’ forecasts polled by MarketWatch.

By mid-afternoon in London, the Dollar gold prices held at $1085 per ounce – barely $1 above where it ended Friday before the Paris atrocities began.

“Notwithstanding any very short-term safe-haven bids, I think we’re still probably coming under pressure from macroeconomic factors, in particular the looming USA rate hike next month”, said Mr Butler. Silver rose 0.2% to $14.27 an ounce, platinum was up 0.3% at $858.90 and palladium climbed 1.6% to $544.50. The rationale is that other assets, including equities, bonds and even other commodities, could drop in price dramatically as consumers huddle up and curb spending, or industry sees changes in buying patterns.

If gold slips under US$1,000 per ounce, this will be extremely bad news for beaten-down gold miners because many are struggling to remain profitable.