Futures & Commodities

Gold slides to nine-month low as dollar rallies on US data


Gold slid to a nine-month low on Wednesday as a buoyant dollar extended its rally on the back of strong U.S. data that further cemented a case for increasing interest rates next month.

Spot gold was down 1.92 percent at $1,188.76 an ounce by 2:35 p.m. EDT. In the previous session, the metal eased 0.15 percent, hurt by strong equities. U.S. gold futures fell 1.89 percent to $1,188.60 per ounce.

Trader predicts a dip in the gold rally

U.S. durable goods orders rebounded in October and jobless claims, though off a 43-year low, remained below a level consistent with a tightening labour market.

The data sent the dollar index to a fresh 13-1/2 year high.

"The dollar rally has been taken to another level on the back of the U.S. durable goods data, which was really stunning," said Naeem Aslam, chief market analyst at Think Markets UK. Gold has shed more than 10 percent from a peak hit in the aftermath of the U.S. election two weeks ago, holding above key support around $1,200.

"It has been a pretty dreadful time for gold. Everything that's good for growth has been negative for gold," said Robin Bhar, head of metals research at Societe Generale in London.

The metal has been hit by expectations that the policies of U.S. president-elect Donald Trump will boost economic growth as well as strong U.S. data supporting the case for a rate hike.

Gold is highly sensitive to rising interest rates, which lift the opportunity cost of holding non-yielding assets such as bullion while boosting the dollar, in which it is priced.

Traders are pricing in a 100 percent chance of a December rate increase, according to the CME Group's FedWatch Tool.

Randgold CEO says gold is ready to go higher

The U.S. Federal Reserve next meets Dec. 13-14.

Uncertainty surrounding Italy's constitutional referendum on Dec. 4 and French and German elections next year, however, could support gold through safe-haven buying, Bhar said.

"Seasonally, as we move towards Christmas, New Year and Chinese New Year, that should see some physical support."

While Trump's victory has spurred safe-haven buying of physical gold in Europe, traditional bullion holders in the United States are standing pat.

Spot gold looks neutral in a range of $1,204-$1,222 per ounce, and an escape could indicate a direction, according to Reuters technicals analyst Wang Tao.

Silver was up 0.2 percent to $16.66 per ounce and platinum was 0.56 percent higher at $942.20.

Palladium was down 0.14 percent at $739.00, after touching its best since early June at $749.40 in the previous session.