Gold fell to the lowest in three weeks following a “no” vote in a Swiss referendum to more than double the central banks gold reserves and as tumbling oil prices downplayed concerns of inflation. A strong dollar, boosted by a weak euro and yen, also kept pressure on precious metals. Silver slid to the lowest in more than five years.
Comex gold for delivery in February fell 1.78% to $1 154.6 per troy ounce by 10:06 GMT, having earlier declined to $1 141.7 an ounce, the lowest since November 7th. The precious metal settled 1.84% lower on Friday at $1 175.5 an ounce, closing the week down 1.9%. Prices fell for a third month in November.
Gold is headed for the first back-to-back annual drop since 2002 as the Federal Reserve wrapped up its unprecedented Quantitative Easing program and an interest rate hike is expected at some point in 2015. Diverging monetary policies between the Federal Reserve and other central banks, including the ECB and BOJ, have kept the dollar supported near the highest level in four and a half years, weighing on dollar-denominated commodities across the board.
The US dollar index for settlement in December stood at 88.425 at 10:06 GMT, up 0.01% on the day, having risen to 88.505 earlier in the session, an inch below November 24ths 4-1/2-year high of 88.515.
Further pressuring gold, Swiss people cast a decisive “no” vote in a referendum to ban the Swiss National Bank from selling its gold reserves and require the central bank to back at least 20% of its assets with the precious metal, from nearly 8% previously.
The proposal met broad disagreement, with 77% of participants voting against the measure. A “yes” vote would have led to the purchase of 1 500 tons of gold over the next five years, which according to analysts could have resulted in a short to mid-term gain of $50 in prices.
Demand outlook for the precious metal also took a hit as oil prices fell to the lowest in five years, easing concerns of inflation. The Organization of the Petroleum Exporting Countries reached a collective decision not to cut output despite global oversupply, resisting calls from smaller producers to address the recent price rout by reducing production.
Further weighing on commodities, manufacturing growth in top gold consumer China stalled, adding to fears of an economic slowdown and boosting expectations for further monetary easing. Investors eyed cues from Europe and the US.
Reflecting downbeat sentiment toward the precious metal, assets in the SPDR Gold Trust, the biggest bullion-backed ETF, slid to 717.63 tons on Friday, the lowest since September 2008. The fund hasnt seen an inflow since November 17th.
Elsewhere on the precious metals market, silver for delivery in March plunged 3.38% to $15.030 per ounce by 10:06 GMT after it earlier touched a five-year low of $14.155. The metal fell for a fifth straight month in November, the longest such streak since June 2013. Platinum futures for settlement in January dropped 1.88% to $1 188.5, while palladium for delivery in March slid 2.19% to $795.50.
Pivot points
According to Binary Tribune’s daily analysis, February gold’s central pivot point on the Comex stands $1 179.6. If the contract breaks its first resistance level at $1 195.2, next barrier will be at $1 214.9. In case the second key resistance is broken, the precious metal may attempt to advance to $1 230.5.
If the contract manages to breach the S1 level at $1 159.9, it will next see support at $1 144.3. With this second key support broken, movement to the downside may extend to $1 124.6.
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