Gold Sags to Five-Year Low as ETPs Drop to Smallest Since 2009

  • Investors sold exchange-traded products for ninth day
  • Expectations of U.S. interest-rate increase curb gold demand

Gold futures fell to the lowest in more than five years as investors sold bullion-backed funds amid expectations for a U.S. interest-rate increase in December.

Global holdings in exchange-traded products backed by gold dropped to the lowest since March 2009 on Wednesday, data compiled by Bloomberg show. The precious metal extended declines after a report showing U.S. jobless-benefit claims were unchanged last week, signaling employers are holding the line on firings and boosting the case for the Federal Reserve to tighten monetary policy. 

There’s a 66 percent probability that policy makers will raise rates for the first time since 2006 when they meet next month, Fed-fund futures data show. Higher rates curb gold’s appeal because it doesn’t pay interest. Investors will be looking for further clues on the timing of a liftoff from Fed officials including Chair Janet Yellen, who speaks at a conference Thursday.

“With gold prices off some $100 in the past couple of weeks, we aren’t surprised to see the outflow from gold ETPs,” Jordan Eliseo, chief economist at Australian Bullion Co. in Sydney, said by e-mail. “It’s reflective of sentiment toward precious metals, which is incredibly bearish. Everyone is long the dollar right now, though gold could be due for some short term respite.”

Gold futures for December delivery fell 0.4 percent to settle at $1,081 an ounce at 1:42 p.m. on the Comex in New York, after touching $1,073, the lowest since February 2010.

Investors sold gold through ETPs for a ninth straight day, the longest streak since July. More than $8 billion has been wiped from the value of assets this year. The net-long position fell 40 percent to 72,075 contracts in gold futures and options in the week ended Nov. 3, according to U.S. Commodity Futures Trading Commission data.

Buying of gold including bars, coins and jewelry rose to the highest in two years after lower prices spurred demand last quarter, the World Gold Council said Thursday. Central banks and other institutions boosted gold purchases to the second-highest level on record in the quarter to September as countries including China and Russia sought to diversify their foreign-exchange reserves, the council said.

Silver futures declined on the Comex. On the New York Mercantile Exchange, palladium and platinum fell.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE