Gold loses lustre as investors sell ETPs

Gold's image as a haven asset has taken a battering with the metal heading for its third-straight annual loss amid the sale of gold-backed funds by investors.

Bullion for immediate delivery rose 0.2 per cent to $1,063.22 an ounce at 3:32 pm. in Singapore after declining 0.7 per cent on Wednesday, according to Bloomberg generic pricing.

It's down 10 per cent this year following a 1.4 per cent drop in 2014 and a 28 per cent loss in 2013.

Gold is in the longest slump since 2000 as the dollar surged on the back of monetary policy tightening in the US, joining a collapse in prices of commodities from iron ore to oil.

Holdings in gold exchange-traded products have declined 10 times in the last 13 sessions to 1,466.45 metric tons, near the lowest in more than six years. "Gold is suffering from the general exodus out of commodity investments," Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen, said by e-mail.

Being one of the most-traded commodities through ETF's, the selling pressure from paper investors has been felt particularly hard and gold's safe-haven status has suffered."

Gold will face a tough challenge at the start of 2016 and prices may drop toward the $1,000 level before recovering toward $1,200 by the end of the year as the dollar and bond yields retreat, Hansen said.

The first interest rate increase since 2006 took place this month and traders are now looking to the pace at which the Federal Reserve will raise borrowing costs in 2016.

While HSBC Holdings Plc predicts just two rate increases, Goldman Sachs Group Inc. is among banks that see four. Bullion will drop to $950 by the end of next year, according to Barnabas Gan, an economist at Oversea-Chinese Banking Corp., who's the top ranked precious metals forecaster.

Spot silver is also headed for a third year of declines after dropping 11 per cent in 2015. Palladium slumped 31 per cent, the most since 2008, while platinum lost 28 per cent.

The two metals, used in catalytic converters that curb car and truck emissions, fell this year partly because of the Volkswagen AG emissions scandal, which hurt prospects for demand.