Gold’s image as a haven asset has taken a battering with the metal heading for its third straight annual loss amid the sale of gold-backed funds by investors.
Bullion for immediate delivery rose 0.2 percent to US$1,063.22 an ounce at 3:32pm in Singapore after declining 0.7 percent on Wednesday, Bloomberg generic pricing showed. It was down 10 percent last year following a 1.4 percent drop in 2014 and a 28 percent loss in 2013.
Gold is in the longest slump since 2000 as the US dollar surged on the back of monetary policy tightening in the US, joining a collapse in prices of commodities from iron ore to oil.
Holdings in gold exchange-traded products have declined 10 times in the last 13 sessions to 1,466.45 metric tonnes, near the lowest in more than six years.
“Gold is suffering from the general exodus out of commodity investments,” Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen, said by e-mail.
“Being one of the most-traded commodities through ETF’s [exchange-traded funds], the selling pressure from paper investors has been felt particularly hard and gold’s safe-haven status has suffered.”
Gold is to face a tough challenge at the start of this year and prices might drop toward the US$1,000 level before recovering toward US$1,200 by the end of the year as the US dollar and bond yields retreat, Hansen said.
The first interest rate increase since 2006 took place last month and traders are now looking to the pace at which the US Federal Reserve is to raise borrowing costs this year. While HSBC Holdings PLC predicts just two rate increases, Goldman Sachs Group Inc is among banks that see four.
Bullion is likely to drop to US$950 by the end of this year, according to Barnabas Gan, an economist at Oversea-Chinese Banking Corp (華僑銀行), who is the top ranked precious metals forecaster.
Spot silver is also headed for a third year of declines after dropping 11 percent last year.
Palladium slumped 31 percent, the most since 2008, while platinum lost 28 percent. The two metals, used in catalytic converters that curb car and truck emissions, fell this year partly because of the Volkswagen AG emissions scandal, which hurt prospects for demand.
Metals in London are poised for the first monthly gain since April as a year-end rally pares declines racked up over last year that were driven by fading demand growth in China, the world’s largest consumer.
“Chinese economic data has improved a bit already,” Angus Nicholson, market analyst at IG Markets Ltd in Melbourne, said by telephone. “Along with the bounce-back in industrial production, the hope is you will also see an improvement with the forthcoming PMIs in January.”
Copper rose as much as 0.2 percent to US$4,744.50 a tonne on the London Metal Exchange and traded little changed at US$4,731.50 at 3pm in Shanghai. The metal was 3.2 percent higher last month, while the LME Index of six base metals has risen 3.4 percent, paring its loss this year to 24 percent. On the Shanghai Futures Exchange, copper rose 0.5 percent to close at 36,650 yuan (US$5,646) a tonne for a 5.2 percent gain last month.
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