Gold futures headed for the biggest drop in three weeks as a stronger dollar and slumping oil prices curbed demand for the metal.
Benchmark Brent crude yesterday fell the most in more than three years after the 12-nation Organization of Petroleum Exporting Countries kept its output target unchanged, cutting gold’s appeal as an inflation hedge. The dollar rose to a five- year high against a basket of 10 currencies on speculation that lower crude prices will boost the U.S. economy, paring demand for bullion as an alternative investment.
Gold is heading for a second straight annual loss, the longest slump since 1998, after the dollar strengthened and inflation failed to accelerate this year. Societe Generale SA trimmed its price forecast for bullion this week, saying the Federal Reserve will boost interest rates by mid-2015 as U.S. economic growth improves.
“There was a selloff in crude oil and the dollar rallied, and there’s a question of disinflation here,” Bart Melek, the head of commodity strategy at TD Securities in Toronto, said in a telephone interview. “One of the motives to buy gold is to hedge against inflationary pressure, and we’ve got the opposite.”
Gold futures for February delivery fell 1.5 percent to $1,179.40 an ounce at 11:41 a.m. on the Comex in New York. A close at that price would mark the biggest decline since Nov. 5. Floor trading was shut yesterday for Thanksgiving.
Restrictions on gold imports in India were withdrawn, effective immediately, the Reserve Bank of India said. A Finance Ministry official said the country scrapped the “20:80” rule to remove distortions in shipments of gold into India and exports of jewelry.
“It might look good on the official books, but I think the impact on gold wasn’t near as robust as some would have hoped,” Melek said. Even with the rule, “you already had informal channels develop” for buying and selling gold, he said.
Switzerland will vote Nov. 30 on an initiative that would require the central bank to hold at least 20 percent of its assets in gold from about 8 percent now. A plurality of voters oppose the measure, though a portion were still undecided, polls released last week showed.
Silver futures for March delivery on the Comex slumped 5.5 percent to $15.695 an ounce, headed for the biggest drop in 14 months.
Platinum futures for January delivery on the New York Mercantile Exchange fell 1.3 percent to $1,212.70 an ounce. Palladium futures for March delivery advanced 1.1 percent to $811.20 an ounce.