Gold Drops Most in Two Weeks as Volatility Reaches 11-Month High

Gold futures fell the most in more than two weeks as a slump in oil cut the appeal of the metal as an inflation hedge. Volatility in the metal rose to the highest since January.

The gauge of 60-day historical volatility reached 18.4, the highest since Jan. 10. Aggregate trading was 22 percent lower than the average in the past 100 days for this time, according to data compiled by Bloomberg.

Gold in November touched $1,130.40 an ounce, 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. Crude futures in New York fell as much as 3.5 percent today.

“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 1.4 percent to settle at $1,179.80 at 1:42 p.m. on the Comex in New York. The metal has dropped 15 percent from this year’s high of $1,392.60 on March 17.

Prices extended losses as the Bloomberg Dollar Spot Index erased declines and oil prices fell further. The U.S. Commerce Department will tomorrow report on gross domestic product in the third quarter.

‘Gold’s Health’

“The tumble in oil prices is detrimental to gold’s health,” David Meger, the director of metal trading at Vision Financial Markets in Chicago, said in a telephone interview. “Of course, the dollar and expectations of strong GDP continue to weigh on gold.”

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.

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.

Silver futures for March delivery declined 2.1 percent to $15.688 an ounce on the Comex. This year, the metal has slumped 19 percent this year, while gold dropped 1.9 percent.

Platinum Prices

On the New York Mercantile Exchange, platinum futures for January delivery dropped 1.3 percent to $1,182.80 an ounce. Trading was more than double the average in the past 100 days for this time, according to data compiled by Bloomberg.

The metal for immediate delivery reached $1,176.75, the lowest since July 2009, according to Bloomberg generic prices.

“It’s the same tired story of platinum tracking gold prices,” James Steel, an analyst at HSBC Securities (USA) Inc., said in a telephone interview.

Palladium futures for March delivery gained 1.3 percent to $815.25 an ounce, rising for a third straight session.

This year, platinum prices declined 14 percent on the Nymex, while palladium gained 14 percent.

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