Gold slips, but tallies biggest monthly gain since January

31 Aug 2015 | Author: | No comments yet »

Gold Prices Fall as Traders Mull U.S. Monetary Policy.

Gold futures settled lower on Monday for a fifth time in six sessions as investors continued to gauge the likelihood of a U.S. interest-rate hike by year-end. Gold prices fell on Monday as investors focused on the impact of recent upbeat U.S. economic reports on future monetary policy action from the Federal Reserve. The most actively traded contract, for December delivery, was recently down $6.10, or 0.5%, at $1,127.90 a troy ounce on the Comex division of the New York Mercantile Exchange.

It saw a monthly gain of around 3.4%, which was the largest since January’s 8% surge. “The negative stock-market action we’ve seen this past two weeks would put a bid into gold under normal market conditions, but the [Federal Reserve] meetings out of Jackson Hole, Wyoming have given market participants a spook, as officials are still strongly considering a rate hike by year-end,” said Adam Koos, president of Libertas Wealth Management Group. “So while gold has rebounded from one of its lowest closes in over five years … the market cares more about rates and economic data than anything else,” he said. “Gold may be a safe haven for nervous money, [but] that same nervous money has been finding a home in fixed income investments instead, with hope that yields will rise as the Fed finally pulls the trigger on their first rate hike in years,” said Koos. Any sign that growth is improving is likely to make it easier for Fed officials to raise interest rates, a policy shift they’ve indicated is likely to come before the end of 2015.

The recent losses close the chapter on gold’s August rally, which saw prices run higher during a period of significant global market turbulence as investors sought a haven. The yellow metal had been one of the few bright spots among commodities, which have been hit hard by concerns about the health of the Chinese economy. A rate increase would increase the attractiveness of the U.S. dollar DXY, -0.04% and put pressure on dollar-denominated assets like gold and silver, making them more expensive for buyers in other currencies.

Still, “the current volatility and big moves in various currencies is an environment where one might expect strength in gold, which is what we had this month albeit not a large move,” said Alan Konn, managing director of Price Asset Management and co-chairman of Price Holdings Inc. In other metals, December silver SIZ5, +0.69% tacked on 3.7 cents, or 0.3%, to $14.586 an ounce, losing around 1.1% compared with the $14.745 settlement of the September contract on July 31.

The two countries account for about half of the world’s retail demand for the commodity. “Both gold investments and jewelry buying is seeing some recovery from a low base,” said Jammy Chan, head of Greater China for Gold Bullion International, a trading platform that deals mostly with institutional clients.

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