Gold's volatility nears 11-month high

December 22, 2014 04:46 AM

Gold futures traded below $1,200 an ounce as investors weighed the slump in oil prices and the dollar’s outlook. Volatility in the metal was close to the highest since January.

The gauge of 60-day historical volatility approached 18.1, a level on Dec. 16 that was the highest since Jan. 10. Aggregate trading was 55 percent lower than the average in the past 100 days for this time, according to data compiled by Bloomberg.

In November, gold touched $1,130.40, a four-year low. Last week, holdings in exchange-traded products backed by the metal dropped to the lowest since 2009 as the dollar surged to a five- year high against a basket of 10 currencies on the outlook for higher U.S. interest rates. The drop in energy prices reduced demand for an inflation hedge.

“The overall environment is very negative for gold,” Phil Streible, a senior commodity broker at R.J. O’Brien & Associates in Chicago, said in a telephone interview. “The market will remain volatile as trading will be very thin for the next two weeks.”

Gold futures for February delivery fell 0.1 percent to $1,195 at 10:38 a.m. on the Comex in New York. Through Dec. 19, the price dropped 14 percent from this year’s high of $1,392.60 on March 17.

In the week ended Dec. 16, money managers’ net-long position in Comex futures and options fell for the first time in five weeks, government data showed on Dec. 19.

 

 

‘Patient’ Fed

Federal Reserve officials last week dropped a pledge to keep borrowing costs near zero percent for a “considerable time,” replacing it with a promise to be “patient,” according to a statement.

Gold surged 70 percent from December 2008 to June 2011 as central banks increased money supply on an unprecedented scale, spurring concerns that inflation would accelerate. The metal tumbled 28 percent in 2013, the biggest drop in three decades, amid gains for the U.S. economy.

Through Dec. 19, Brent oil dropped 45 percent this year, the most among 22 raw materials in the Bloomberg Commodity Index. The dollar gained 10 percent.

Silver futures for March delivery declined 0.6 percent to $15.94 an ounce on the Comex. Through Dec. 19, the metal slumped 17 percent this year, while gold dropped 0.5 percent.

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