Gold Drops to Lowest This Year as Platinum Slumps With Palladium

Gold extended losses to the lowest this year after U.S. payrolls beat forecasts, boosting the dollar and stoking expectations the Federal Reserve will increase interest rates. Platinum fell to a five-year low and silver declined to the lowest since 2010.

Bullion for immediate delivery lost as much as 0.7 percent to $1,183.24 an ounce, a level last seen on Dec. 31, and was at $1,190.26 by 2:32 p.m. in Singapore, according to Bloomberg generic pricing. Platinum slumped as much as 2.8 percent, while silver decreased 1 percent and palladium fell 2.4 percent.

Investors are shunning gold as signs that the U.S. economy is accelerating boost the dollar and raise expectations the Fed will move closer to an increase in borrowing costs. Higher rates reduce gold’s allure because the metal generally only offers investors returns through price gains, while a stronger dollar typically cuts demand for a store of value. Speculators pared bets on rising prices for a seventh week and assets in the SPDR Gold Trust have dropped to the lowest level since 2008.

“The U.S. dollar is going one way at the moment and it’s a major headwind,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd., said by phone today. “Since the rally in the dollar, we’ve seen further selling in ETF holdings. That’s a dual headwind because it gives a visible lack of confidence for the gold market.”

Dollar Climbs

The Bloomberg Dollar Spot Index rose for a seventh week in the period ended Oct. 3, the longest rally since June 2010, after American employers added more workers than forecast and the unemployment rate fell to the lowest since July 2008. Payrolls increased by 248,000 in September, beating the median estimate in a Bloomberg survey for a 215,000 advance, the U.S. Labor Department said Oct. 3. The jobless rate fell to 5.9 percent from 6.1 percent in August, data showed.

The Fed is considering the timing for its first interest-rate increases since 2006 amid signs the U.S. economy is recovering. The central bank is on track to end a program of stimulatory bond purchases this month.

Bullion is headed for the first back-to-back annual loss since 2000 after tumbling 28 percent last year, the most in three decades. The net-long position in gold declined 15 percent to 37,743 futures and options in the week ended Sept. 30, U.S. Commodity Futures Trading Commission data show. The holdings are down 72 percent in seven weeks.

About $4 billion has been erased from the value of exchange-traded products backed by gold this year. Investors sold 10 metric tons of metal held through ETPs last week, dragging holdings to a five-year low of 1,678.48 tons. Holdings in the SPDR, the biggest gold-backed ETP, fell to 767.47 tons on Oct. 2, the lowest since December 2008, according to data compiled by Bloomberg.

Platinum Slumps

Goldman Sachs Group Inc. said Oct. 2 that a stronger U.S. economy is driving a bearish outlook for gold, maintaining a forecast for prices to reach $1,050 in 12 months. Gold for December delivery dropped as much as 0.8 percent to $1,183.30 on the Comex in New York, the lowest for a most-active contract since Dec. 31, and traded at $1,188.70.

Platinum for immediate delivery slumped to as low as $1,190.25 an ounce, the lowest since July 2009, and traded at $1,200.50. Assets in platinum-backed ETPs have fallen to 84.19 tons, the lowest since May, data compiled by Bloomberg show.

Prices lost 12 percent this year as output in South Africa, the world’s biggest producer, resumed after a strike. In Europe, which accounts for 25 percent of global demand, car sales grew at the slowest pace this year in August, and a German manufacturing gauge slid to a 15-month low in September.

The net-long position in New York futures and options dropped 26 percent in the week ended Sept. 30 to 13,265 contracts, the lowest level this year, according to CFTC data. The 14-day Relative Strength Index for platinum was at 9 and has been below 30 since Sept. 8, a signal for some traders that prices are set to rebound.

Spot palladium fell to as low as $737.75 an ounce, the lowest since Feb. 27, before trading at $748. Silver slid to as low as $16.6825 an ounce, a level last seen in March 2010, and was at $16.8405.

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