Gold and silver extended their losing streak to a fourth session on Monday to trade near their lowest in more than four years, with a stronger US dollar and possible technical selling likely to keep them under pressure.
Precious metals took a beating on Friday after the Bank of Japan’s surprise decision to boost its already huge bond-buying stimulus prompted the yen to fall to a seven-year low against the dollar.
On Monday, the dollar hit a four-year peak against a basket of major currencies, further hurting the bullion’s appeal as a hedge.
“It's pretty hard to find anything bullish on gold at the moment,’’ said ANZ analyst Victor Thianpiriya, adding that currency movements, weak physical demand and fund outflows were all taking a toll on prices.
“The next support for gold is around $1,155-60 but not much support below that on the charts. If we don’t bounce back soon above $1,180, we are looking at that as a big resistance level.’’
Spot gold dropped 1 per cent on Monday before recovering slightly to trade down 0.6 per cent at $1,166.95 an ounce by 0300 GMT. It fell to its lowest since July 2010 at $1,161.25 on Friday, before closing down 2 per cent.
Among other precious metals, silver tracked gold, falling to $15.72, its lowest since early 2010. Platinum was trading near its lowest in a month. The $1,180 level — which gold broke through on Friday — was seen as a significant one for gold, with chartists now eyeing prices below $1,000 for the first time in five years.
A strong greenback makes gold more expensive for holders of other currencies, while also dimming the yellow metal’s appeal as a hedge. The prospect of higher interest rates in the United States has also hurt gold recently along with strong economic data.
SPDR Gold Trust
Gold is a non-interest-bearing asset and is often seen as a safe-haven asset. Outflows from SPDR Gold Trust — the world’s largest gold-backed exchange-traded fund — accelerated in October, with holdings of the fund now at a six-year low.
Hedge funds and money managers cut their bullish long position in gold in the week up to October 28, the Commodity Futures Trading Commission had said on Friday.
“We suspect that we will likely be heading lower from here given that a number of bearish variables seem to be converging on gold all at once,’’ said INTL FCStone analyst Edward Meir.
Gold failed to find support from the physical markets in top consuming region Asia. In China, the world’s biggest buyer of gold, local prices had slipped to a discount to the global benchmark from premiums last week — an indication of weak buying interest.
Gold stocks in Australia, the world’s no. 2 producer, also took a hit following the drop in gold prices. Australia’s largest producer, Newcrest Mining Ltd, dropped more than 7 per cent, while St Barbara Mines lost 9 per cent and Evolution Mining was down 6.7 per cent.