Gold (COMEX:CGF15) fell from a six-week high as investors weighed expectations for rising U.S. interest rates against a weaker dollar.
The Bloomberg Dollar Spot Index slipped for a third day after reaching a five-year high this week. The Federal Reserve meets next week as policy makers debate the timing of the first interest-rate increase in eight years. Rising rates cut gold’s allure because bullion generally offers investors returns only through price gains, while the precious metal typically moves inversely to the greenback.
“We have the view that it’s going to be challenging ahead” for gold, Joni Teves, a precious metals analyst at UBS Group AG, said by phone. She cited “the fact that the Fed is going to normalize” monetary policy, and increasing optimism about U.S. economic growth.
Gold for immediate delivery slipped 0.4 percent to $1,226.33 an ounce by 10:53 a.m. in London trading. Yesterday, it reached $1,238.32, the highest price since Oct. 23, as a weaker dollar and global stock markets spurred demand for a store of wealth. Gold for February delivery fell 0.4 percent to $1,227.10 on the Comex in New York.
Futures trading volumes were 5 percent higher than the average for the past 100 days for this time of day, according to data compiled by Bloomberg.
“The bears have had their noses bloodied as of late and this has created a marketplace that is reluctant to go heavily short at the moment,” David Govett, head of precious metals at Marex Spectron Group in London, said in an e-mailed note. Investors who are betting on higher prices are looking for gold to test $1,250 an ounce, he added.
“Whilst this is entirely possible should the dollar and stock markets continue their downward move, I very much doubt we will see prices a lot higher unless other factors help.”
India, the world’s biggest consumer of gold after China, will implement any further relaxation of import restrictions in a measured way as concern over the current-account deficit eases, Junior Finance Minister Jayant Sinha told reporters in New Delhi.
Holdings in exchange-traded products backed by bullion gained 0.2 percent to 1,609.8 metric tons as of yesterday, rising for the first time in four days.
Silver for immediate delivery fell 0.4 percent to $17.0006 an ounce. Platinum was little changed at $1,246.12 an ounce, while palladium advanced 0.5 percent to $813 an ounce.