Gold and silver drop as energy prices decline

December 2, 2014 08:33 AM
Gold and silver futures fell as the dollar’s rebound and a slump in energy costs eroded demand for the precious metals as a store of value.

Yesterday, gold and silver surged the most since September 2013 after crude prices rallied. Today, the dollar climbed to the highest since March 2009 against a basket of 10 currencies, and oil futures on the New York Mercantile Exchange fell as much as 3.6 percent.

On Nov. 7, gold touched $1,130.40 an ounce, a four-year low. The dollar has climbed on signs that the U.S. economy is gaining traction. Employment data this week may show that companies added 230,000 jobs last month, compared with 214,000 in October, according to a Bloomberg survey. The drop in oil crimped demand for the metal as an inflation hedge.

“The dollar’s strength is gold’s biggest enemy,” Fain Shaffer, the president of Infinity Trading Corp. in Indianapolis, said in a telephone interview. “Investors are wondering whether yesterday’s rally in oil prices was a dead-cat bounce.”

Gold futures for February delivery dropped 1.5 percent to settle at $1,199.40 at 1:54 p.m. on the Comex in New York. Yesterday, gold jumped as much as 3.9 percent, and volume climbed to an estimated 370,132 contracts, the highest since June 20, 2013.

Dollar’s Rally

This year, the dollar has climbed 9 percent, while gold has dropped 0.2 percent. Brent crude has tumbled 36 percent, the most among 22 raw materials in the Bloomberg Commodity Index. Oil’s drop will provide a net boost to the global economy, Christine Lagarde, the International Monetary Fund’s managing director, said yesterday. Gains in the U.S. economy will boost the case for higher interest rates amid increased stimulus in Europe and Japan, analysts say.

“The dollar still appears to be the favored currency and may provide greater headwinds for gold,” James Steel, an analyst at HSBC Securities (USA) Inc., said in a note.

Global holdings in exchange-traded funds backed by gold have dropped 8.4 percent in 2014 to the lowest in five years, according to Bloomberg data.

Silver futures for March delivery slid 1.4 percent to $16.456 an ounce. Trading was 29 percent above the 100-day average for this time. The price has dropped 15 percent this year.

Yesterday, the price fell as much as 9 percent to $14.155, the lowest since August 2009, and surged as much as 8.1 percent. Volume rose to an estimated 128,927 contracts, the highest since April 24.

Gold closed up 3.6 percent yesterday, while silver jumped 7.3 percent.

On the New York Mercantile Exchange, platinum futures for January delivery fell 1.9 percent to $1,217.50 an ounce, the biggest drop since Oct. 3. Palladium futures for March delivery slipped 0.5 percent to $803.75 an ounce.

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