Gold futures continued to fall Thursday, capping the longest slump since May 2013, as the dollar's rally eroded the appeal of the precious metal as an alternative investment. The greenback rose to a five-year high against a basket of 10 currencies on signs that the U.S. economy is gaining traction.
Ratios with commodities including silver and oil indicate that gold is relatively expensive. Investors should watch holdings in exchange-traded products backed by gold to gauge whether the price slump will continue, James Steel, an analyst at HSBC Securities (USA) Inc., said Wednesday in a report. Global assets in ETPs backed have dropped to the lowest since September 2009.
“Gold is a victim of the dollar strength,” Ade Odunsi, a portfolio manager at New York-based Treesdale Partners LLC, said in a telephone interview. “There is a big expectation that the U.S. economy will continue to grow and that will further boost the dollar.”
Gold futures for December delivery dropped 0.3 percent to settle at $1,142.60 an ounce at 2:08 p.m. on the Comex in New York, falling for the seventh straight session. Trading Thursday was 26 percent above the 100-day average for this time, according to data compiled by Bloomberg. Wednesday, the most-active contract touched a 54-month low of $1,137.10.
The divergence between the U.S. and economies including the European Union and Japan is driving gains for the dollar. Fewer Americans are being fired, and productivity is increasing, government data showed today. European Central Bank President Mario Draghi deepened his commitment to a stimulus program.
Gold headed for a consecutive annual drop for the first time since 1998. The price slumped 28 percent last year as equities surged and inflation remained low. In 2013, an outflow of 869 tons from ETP holding helped wipe out more than $73 billion from the value of the funds.
Silver futures for delivery in December fell 0.2 percent to $15.413 an ounce on the Comex. Wednesday, the price touched $15.12, the lowest since Feb. 10.
On the New York Mercantile Exchange, platinum futures for January delivery fell 1.1 percent to $1,197.10 an ounce, the lowest settlement since July 30, 2009.
Palladium futures for December delivery declined 0.7 percent to $752.60 an ounce.
This year, gold has dropped 5 percent, silver tumbled 20 percent and platinum is down 13 percent. Palladium has gained 4.8 percent. The dollar is up 7.7 percent against the currency basket.
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