Gold Goes Quiet as Bears Take Breather After Drop to 5-Year Low

  • 60-day historical volatility sags to lowest since Oct. 28
  • `Metals have priced in at least one rate hike,' RBC says

After gold’s punishing drop to a five-year low, bears are finally giving the metal a break.

Signs of the quieting market were evident as a measure of swings for futures slumped on Friday to the lowest in three weeks. Investors are taking a breather after coming down hard on bullion for the past month in anticipation of higher U.S. interest rates, which cut the appeal of the metal as a store of value. Prices posted a fifth straight weekly retreat, the longest slide since July.

Gold fell to the lowest since February 2010 on Wednesday, reflecting the expectations for Federal Reserve officials to tighten monetary policy when they meet next month. Fed Vice Chairman Stanley Fischer said Thursday that the central bank has done all it can to avoid surprising markets.

“We have Fed members saying they will raise rates by December, which is old news,” George Gero, a vice president of global futures at RBC Capital Markets in New York, said in a telephone interview. “The metals have priced in at least one rate hike.”

Gold futures for December delivery lost 0.1 percent to settle at $1,076.30 an ounce at 1:44 p.m. on the Comex in New York. Prices fell to $1,062 on Wednesday.

The metal’s 60-day historical volatility dropped on Friday to the lowest since Oct. 28. Fed-fund futures show a 68 percent chance that policy makers will raise rates at their Dec. 15-16 meeting. Higher rates curb the appeal of bullion because it doesn’t pay interest or offer returns like bonds and equities.

Investors are holding the least bullion through exchange-traded products in six years. Holdings in gold-backed ETPs fell 2.6 metric tons to 1,504.54 tons as of Thursday, the lowest since March 2009, data compiled by Bloomberg show.

Silver futures for March delivery declined 0.9 percent to $14.126 an ounce on the Comex. On the New York Mercantile Exchange, palladium futures for December delivery added 3.3 percent to $558.90 an ounce, while platinum futures for January delivery slid 0.3 percent to $855.90 an ounce.

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