Gold dips amid muted trading conditions, silver tumbles

Dec 28, 2015 - 2:47 PM GMT

Gold futures were holding above $1,070 per ounce to begin the new trading week, which is likely to be quiet as the New Year approaches.

Gold for February delivery on the Comex division of the New York Mercantile Exchange fell $5.10 or 0.5 percent to $1,070.80 per ounce. Trade has ranged from $1,069.50 to $1,076.50.

Markets remain cautious after the Federal Reserve’s rate hike in mid-December, with market participants becoming increasingly net-short before the policy-board decided to normalise rates after seven years of near-zero rates.

However, investors have resumed buying gold assets since the Fed decision with SPDR Gold Trust holdings – the world’s biggest gold exchanged-traded fund – up almost 13 tonnes week-over-week.

It was the largest weekly increase since January 30 of this year and follows seven consecutive weeks of reduction.

“The combined demand of short-covering in the futures market and fresh buying through exchange-traded products has helped trigger a rally to $1,075 from the $1,048 low last Thursday,” Ole Hansen, Head of Commodity Strategy at Saxo Bank, said.

“The technical picture would further improve on a break of trend line resistance at $1,082 as it would bring the key $1,100 level back into play,” he added.

Next year’s outlook is still rosy for the precious metal despite the recent Fed decision and likely strengthening dollar, according to one market commentator.

“Gold’s role as a portfolio diversifier, a wealth preservation tool and a tail risk hedge will continue to prevail due to expensive stock valuations and high liquidity risks,” Alistair Hewitt, Head of Market Intelligence at the World Gold Council, said.

“Gold’s cultural significance endures as we look ahead to 2016,” Hewitt argued while mentioning that the recent interest rate rise could lead to increased demand in price sensitive markets like India and China.

In the interim, markets are expected to resume major activity after the New Year, with reduced liquidity potentially leading to outsized price movements.

Meanwhile in data, there are no major economic reports scheduled for release today. On Tuesday, the US goods trade balance, S&P/CS Composite-20 HPI and CB consumer confidence are slated for release.

Turning to wider markets, Germany’s DAX and France’s CAC-40 were down 0.6 percent and 0.9 percent respectively, while the dollar was last trading 0.1 percent stronger at $1.0971 against the euro.

As for other precious metals, Comex silver for March settlement tumbled 33.9 cents or 2.3 percent to $14.045 per ounce. Trade has ranged from $14.000 to $14.425.

Platinum for January delivery declined $2.0 to $882.20 per ounce, while the most-actively traded palladium contract stood at $560.00 per ounce, up 75 cents.

(Editing by Tom Jennemann)

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