Gold hits four-month low as firmer dollar sparks range break

Last Updated: Thu, Dec 07, 2017 17:30 hrs
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LONDON: Gold slid to its lowest in four months on Thursday as a bounce in the dollar sparked by optimism over U.S. tax reform plans pushed the metal out of its recent narrow trading range.

The metal had been hemmed between $1,265 and $1,300 an ounce since mid-October as a series of record highs in stock markets detracted investment interest from bullion, and as traders awaited an expected U.S. interest rate hike this month.

It broke out of that range this week, extending losses after slipping below its 200-day moving average at $1,267 an ounce.

Spot gold was down 0.6 percent at $1,255.85 an ounce at 1055 GMT, off an earlier four-month low of $1,254.51. U.S. gold futures for December delivery were down $8.20 an ounce at $1,257.90.

"We've had a (breakdown) of support at $1,260, which is a key level," ActivTrades chief analyst Carlo Alberto de Casa said. "From a technical point of view, many traders had stop-losses just below $1,262, and today the market is going down for this reason."

Strength in the dollar is feeding into this, he said. "The fact that the U.S. dollar is recovering isn't very welcome for the commodities market."

The dollar touched a two-week high on Thursday on optimism that the United States would successfully push through tax reforms, while world shares rebounded after two straight days of losses.

U.S. Senate Republicans agreed on Wednesday to talks with the House of Representatives on sweeping tax legislation, raising hopes that lawmakers could agree on a final bill ahead of a Dec. 22 deadline.

Gold is now awaiting further direction from U.S. non-farm payrolls data later this week, a key barometer for the health of the U.S. economy. Next week the Federal Reserve is also expected to announce another U.S. interest rate hike, and to guide on the pace of further increases.

Gold is highly sensitive to rising U.S. rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

"Both the fundamentals and the technicals in gold look somewhat bearish at the moment, and we suspect that we could move slightly lower heading into next week's critical Federal Reserve meeting," INTL FCStone analyst Ed Meir said.

Among other precious metals, silver was down 0.4 percent at $15.90 an ounce after earlier slipping to its lowest since mid-July at $15.82.

Platinum was 0.3 percent lower at $898.65 an ounce, after earlier having hit its lowest since July 11 at $893. The metal has fallen nearly 5 percent this week, putting it on track for its biggest weekly loss in nine months.

Palladium was up 0.3 percent to $996 an ounce.

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