Gold Slides to 10-Month Low as Fund Selling Binge Haunts Market

Updated on
  • Holdings in bullion-backed funds decline for 14th day in a row
  • Report Thursday shows U.S. manufacturing expanded in November

Gold sank to the lowest in almost 10 months and funds backed by the metal continued to shrink as a strengthening U.S. economy drives investors into higher-yielding assets.

Assets in exchange-traded funds backed by bullion declined for a 14th day, the longest run since March 2015, amid speculation the Federal Reserve will raise U.S. interest rates at least twice in the next year. Traders are optimistic about the economic outlook as a report Thursday showed U.S. manufacturing expanded in November at the fastest pace in five months, and data Friday is forecast to show payrolls increased by 180,000 in November.

Gold posted the biggest monthly drop since 2013 in November amid a resurgence in appetite for riskier assets after Donald Trump won the U.S. presidential election. Investors who had piled into gold earlier this year are liquidating as the dollar soars and Treasury yields touch the highest levels since mid-2015. Higher rates reduce the appeal of owning gold because it doesn’t pay interest.

“If we see rates go up, it will truly put pressure on gold,” said Peter Thomas, a senior vice president at Zaner Group LLC in Chicago. Trump seems “bullish for business. It’s the perfect storm. Demand has dropped significantly.”

Gold futures for February delivery fell 0.4 percent to $1,169.40 an ounce at 1:49 p.m. on the Comex in New York. The metal dropped 7.8 percent in November and fell below $1,200 last week for the first time since February.

Holdings in exchange-traded funds backed by gold fell by 2.53 metric tons to 1,879.5 tons on Wednesday, the lowest since June.

“Price and ETF flows are highly correlated, so it’s no surprise to see big hedge funds getting out,” said Adrian Ash, head of research at online-trading service Bullion Vault in London.

In other metals news:

  • Palladium futures for March delivery dropped 2.7 percent to $751.70 an ounce on the New York Mercantile Exchange, after rising to an 18-month high. Platinum added 0.2 percent to $911.30 after slipping as much as 1.3 percent to the lowest since February.
  • Silver rose on the Comex.

— With assistance by Ranjeetha Pakiam

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