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Gold extends losses after biggest tumble since 2016

Reuters  |  LONDON 

By Peter Hobson

LONDON (Reuters) - Gold prices continued to lose ground on Wednesday, falling to their lowest since December as the dollar rallied to 2018 highs and U.S. bond yields sat near multi-year peaks.

The had suffered its biggest single-day loss since November 2016 when it fell 1.7 percent on Tuesday after strong U.S. sent the dollar and yields soaring.

Gold's declines were accelerated by technical selling as it crashed below its 200-day moving average and the psychologically significant level of $1,300 an ounce.

By 1227 GMT spot gold was down 0.2 percent at $1,287.61 an ounce, having gone as low as $1,286.20, its weakest since Dec. 27.

U.S. gold futures for June delivery were 0.3 percent down at $1,287.

"The most (for gold) is the dollar and yields," said

A stronger dollar hurts gold by making it more expensive for holders of other currencies, while higher bond yields make non-yielding bullion less attractive to investors.

The strong U.S. also suggested that the Federal Reserve will be confident about raising U.S. interest rates. That is bad for gold because higher rates push up bond yields and tend to boost the dollar.

Gold is likely to fall to $1,275 by the end of June and $1,250 by the end of the year as U.S. yields and the dollar strengthen, said Boele. That is below the $1,310-$1,360 range gold has inhabited since January.

"It held up for so long on such a high level. Now you are below $1,300 and the 200-day moving average; people who hold long positions are a little bit nervous," she said.

Technical and momentum indicators suggested that gold could fall to about $1,278, ScotiaMocatta analysts said. Fibonacci support for the was at $1,287, they added.

Gold is traditionally used as a safe place to park assets during times of uncertainty, but investors largely disregarded that had called off high-level talks with on Wednesday, less than a month before a planned summit between and U.S.

"There are lot of geopolitical risks, but people are just used to it. Therefore it has not become a big for gold," said

In other precious metals, silver was down 0.2 percent at $16.20 an ounce after falling 1.6 percent on Tuesday.

Platinum eased by 0.3 percent to $890.60 and palladium lost 0.3 percent to $979.20.

(Additional reporting by and in Bengaluru; Editing by and David Goodman)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, May 16 2018. 18:08 IST