Gold Settles at Lowest Price This Year

Gold settled at its lowest close of the year and other precious-metals prices tumbled Friday, as a surging dollar and expectations of higher interest rates spurred investors to sell.
Silver prices fell 3.6%, its biggest daily drop in nine months, as investors looked for higher-yielding assets elsewhere.”Cash is flowing to the dollar, the U.S. stock market and the U.S. bond market, and out of precious metals,” said Peter Hug, global trading director at Kitco Metals. “You get the feeling that (precious metals) investors have just given up.”Gold for December delivery, the most actively traded contract, fell $10.30, or 0.8%, to $1,216.60 a troy ounce, its lowest settlement since Dec. 31. Silver for December delivery lost 67.3 cents to end at $17.844 a troy ounce, its lowest price since July 2010. Palladium for December fell 2.3% to $812.60 a troy ounce, and October platinum fell 0.9% to $1,337.30 an ounce.
Driving the selling in gold was a burgeoning dollar. The ICE U.S. Dollar Index notched its longest winning streak in at least 28 years, as it rose for a 10th straight week against a basket of major currencies. Investors have piled into the currency in recent weeks, betting that the Federal Reserve is closer to raising interest rates, a move that would make the dollar more attractive to yield-seeking investors.
On Wednesday, the Fed took tentative steps toward unwinding its historic easy-money policies while reassuring investors that rates will remain low even as the economy expands. The comments sent the dollar soaring, pushed up bond yields and drove the Dow Jones Industrial Average to a historic record. Gold, which doesn’t pay interest and struggles during periods of rising rates, went in the opposite direction, losing 1.5% on the week.
The results of Scotland’s vote on independence also weighed on gold prices, as 55% chose to stay in the U.K. The run-up to the vote had created some concern in markets, with investors unsure what currency regime an independent Scotland would adopt, or how the two countries would divide up debt and natural resources. Some investors gravitate toward gold in times of political or economic uncertainty, believing the metal will hold its value better than other assets when trouble strikes.
“This gold drop isn’t even close to being over,” said Thomas Capalbo, a broker at Newedge. “People have no reason to buy gold right now. There are too many other things happening in markets that provide more opportunity
Source:Bullion Bulletin

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