Gold Declines Toward Three-Month Low on U.S. Outlook

04:34 PM @ Thursday - 11 September, 2014
Gold fell toward a three-month low in London as investors assessed the outlook for an improving U.S. economy. Platinum reached the lowest in seven months and silver declined to the lowest since June.

Prospects for higher borrowing costs in the U.S. and the European Central Bank’s announcement of more stimulus helped the Bloomberg Dollar Spot Index reach a 14-month high yesterday. Data this week may show U.S. retail sales improved. The Federal Reserve, which has been cutting bond buying, meets Sept. 16-17.

Gold is heading for the first quarterly loss this year also as easing of tensions in Ukraine and the Middle East cut haven demand. European Union nations are struggling to agree on a trigger to expand sanctions against Russia over its encroachment in Ukraine as a cease-fire and troop withdrawal bolster the case for holding off. Bullion’s drop took it toward a level that suggests to some traders who study charts that prices may rise.

“The U.S. economy appears to be picking up speed and as monetary policy between the U.S. and other nations differ, the dollar stands to benefit and that will pressure gold lower,” Zhu Runyu, an analyst at CITICS Futures Co., a unit of China’s biggest listed brokerage, wrote in an e-mail. “Geopolitical tensions may flare from time to time but it appears to be easing for now.”

Gold for immediate delivery lost 0.1 percent to $1,248.05 an ounce by 9:36 a.m. in London, according to Bloomberg generic pricing. It fell to $1,243.95 yesterday, the lowest since June 5. Gold for December delivery added 0.2 percent to $1,248.40 on the Comex in New York.

Trading Volume

Futures trading volume was 15 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg show.

Gold’s 14-day relative-strength index was at 30.7 today. A drop to a level of 30 can indicate to traders studying technical charts that prices may be poised to rebound.

“At some point there will be a short-covering rally, which will catch people unawares, but on the whole this is the only reason at the moment for an up move,” David Govett, head of precious metals at Marex Spectron Group in London, said in a note today, referring to closing out bearish bets. “The markets remain in the doldrums.”

Silver for immediate delivery slipped 0.7 percent to $18.8393 an ounce in London. It reached $18.8219, the lowest since June 5. Holdings in silver-backed exchange-traded products rose to 19,897.5 metric tons yesterday, the highest since November.

Platinum lost 0.3 percent to $1,378.87 an ounce, after touching $1,377.21, the lowest since Feb. 7. There’s “value” in platinum below $1,400 and further declines are a buying opportunity, UBS AG wrote in a report today. The metal is mostly used in car catalytic converters, alongside palladium, and supply was cut this year amid a South African mine strike.

Palladium was 0.1 lower at $850.75 an ounce. Prices reached a 13-year high of $912.26 on Sept. 1 amid concern that supplies from Russia, the largest producer, may be disrupted. While Russia has retaliated against previous sanctions by banning imports of some food products, there have been no metal related sanctions yet.
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