Gold Trades Near Four-Year Low as Fed Weighed With Demand

By Nicholas Larkin and Glenys Sim  

Gold traded near a four-year low as investors weighed speculation that the Federal Reserve is preparing to raise interest rates against signs bullion is oversold. Silver headed for the longest run of losses this year.
Gold is set for the first back-to-back annual retreat since 2000 as the Bloomberg Dollar Spot Index holds near a five-year high. The Bank of Japan unexpectedly added to stimulus last week and the European Central Bank sets policy on Nov. 6.
The Fed is now weighing the timing of interest-rate increases after ending bond-buying last month. Rising rates reduce gold’s allure because bullion generally offers investors returns only through price gains, while a stronger dollar typically cuts demand for a store of value. A technical gauge showed gold may have dropped too fast and the U.S. Mint sold the most American Eagle gold coins in October since January.
“Investors still appear to be
negative on gold, based largely on the strength of the U.S. dollar,” James Steel, an analyst at HSBC Securities (USA) Inc., said in a note. Still, “gold prices at current levels may encourage buying by price-sensitive investors,” he said.
Gold for immediate delivery rose 0.2 percent to $1,167.39 an ounce by 9:51 a.m. in London, according to Bloomberg generic pricing. It reached $1,161.35 on Oct. 31, the lowest price since July 2010. Gold for December delivery slipped 0.3 percent to $1,166.70 on the Comex in New York.
Futures trading volume was 20 percent above the average for the past 100 days for this time of day, data compiled by Bloomberg show.

RSI Level

Gold’s 14-day relative-strength index held the previous two sessions below 30, a level that suggests to some traders who study technical charts that prices may be poised to rebound. The gauge was at 24.3 today.
The Fed highlighted “solid” job gains and a falling unemployment rate in its statement on Oct. 29, while pledging to keep borrowing costs at a record low for a “considerable time.” The Labor Department is forecast to report on Nov. 7 that nonfarm payrolls rose 234,000 last month and the unemployment rate held at 5.9 percent.
Holdings in gold-backed exchange-traded products fell 2.2 metric tons to 1,647 tons yesterday, the lowest in five years, data compiled by Bloomberg show.
“Gold is expected to remain weak as there is potential for further easing in Europe, which will continue to lend strength to the dollar,” said Zhu Runyu, an analyst at CITIC Futures Co., a unit of China’s biggest listed brokerage.

Silver Slips

Silver for immediate delivery slipped 0.7 percent to $16.0452 an ounce in London, extending declines into a fifth day in the longest run of losses since November 2013. Prices reached $15.7711 yesterday, the lowest level since February 2010.
Platinum fell 1 percent to $1,227.25 an ounce. Palladium lost 0.6 percent to $799.25 an ounce. Both metals are mainly used in catalytic converters that reduce harmful emissions.
Light vehicles in the U.S. during October sold at a seasonally adjusted annual rate of 16.46 million units, beating the median estimate of 16.4 million in a Bloomberg survey of analysts, Autodata Corp. said yesterday.