November 11, 2016 / 11:30 AM / a year ago

PRECIOUS-Gold sinks to 5-month low on commodity selloff, surging yields

* Gold sinks to lowest since June 3
    * Silver at five-week low, platinum at near three-week low
    * Fed's Fischer says strong case for gradual rate hikes

 (Updates prices; adds comment, byline, NEW YORK dateline)
    By Marcy Nicholson and Eric Onstad
    NEW YORK/LONDON, Nov 11 (Reuters) - Gold prices tumbled 3
percent to a five-month low on Friday, hit by a broad selloff in
commodities as well as surging bond yields on speculation a
splurge of U.S. infrastructure spending could stoke inflation.
    Spot gold was down 3 percent at $1,222.38 an ounce by
3:04 p.m. EST (2004 GMT) after touching a session low of
$1,219.40, the weakest since June 3. The selloff put gold on
track for its poorest weekly performance since June 2013, even
after it rallied nearly 5 percent on Wednesday when results
showed Republican Donald Trump was the U.S. president-elect.
    U.S. gold futures settled down 3.3 percent at
    Spot silver slid 6.5 percent to $17.34 an ounce,
after tapping the weakest since Oct. 7 at $17.15. Platinum
 dropped 3.4 percent to $939.24, after touching $929.75,
the lowest since Oct. 24.
    "There's a broad-based commodity selloff. Copper and nickel
are getting hit and it has spilled over into precious," a
European trader said.
    Gold was already slightly weaker before base metals reversed
and went into negative territory after a sizzling rally, while
oil extended losses.  
    "We're seeing a complete reassessment of various asset
classes following the Trump win earlier this week. The
combination of rising real yields and the stronger dollar is
really hurting sentiment in gold," said Ole Hansen, head of
commodity strategy at Saxo Bank in Copenhagen.
    The dollar was on course for its best week in a year. 
    The market is also betting on the Federal Reserve raising
interest rates more quickly. Gold is highly sensitive to rising
rates, which lift the opportunity cost of holding non-yielding
assets such as bullion, while boosting the dollar, in which it
is priced.
    Fed Vice Chair Stanley Fischer said on Friday that U.S.
economic growth prospects appear strong enough for the Fed to
proceed with a gradual increase in interest rates. 
    "Funds had increased their net longs to a huge degree over
the last two weeks. That put the market in the situation where,
if we started to come under some pressure and you got through
some technical levels, you could see some selling," said Bill
O'Neill, co-founder of LOGIC Advisors.
    "There was such a misinterpretation about what would happen
if Trump was elected. (His speech) totally disarmed those trying
to promote the idea it's going to be chaos." 
    Palladium shed 2.4 percent at $671.98, after rising
to its highest since Oct. 5 at $697.90 earlier.

 (Additional reporting by Jan Harvey in London and Apeksha Nair
and Nallur Sethuraman in Bengaluru; Editing by David Evans and
Lisa Shumaker)

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