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Gold nears four-year low as dollar shines

Reuters London
Gold fell on Monday to near a recent four-year low as the dollar index rose to its highest since mid-2010 on speculation that the US Federal Reserve will act before other major central banks to tighten monetary policy.

Silver prices also tumbled, with the metal touching its lowest since March 2010 at $15.72 an ounce and its cheapest level compared to gold in more than five years.

Spot gold was down 0.3 per cent at $1,170.44 an ounce at 1252 GMT, having earlier fallen as low as $1,161.70. US gold futures for December delivery were down $1.20 an ounce at $1,170.40.

On Friday strength in the dollar knocked gold below key support at $1,180 an ounce, sparking a wave of selling that took prices as low as $1,161.25 an ounce.

"The factors that are depressing the gold price fundamentally are the more hawkish tone from the Fed, strength in the dollar and strong growth. It all means that there is minimal safe-haven demand at the moment," Capital Economics analyst Caroline Bain said.

"If anything, you might have expected gold to have fallen further, given the perfect storm of events that are negative for the gold price."

The US unit hit a seven-year high against the yen after the Bank of Japan opted to boost its already massive bond-buying stimulus last week. It reached a two-year high against the euro due to market talk of further easing from the European Central Bank when it meets later this week.

The dollar index, which measures the US unit's performance against a basket of currencies, reached a four-year high.

The contrast between a raft of relatively upbeat data from the United States and weaker readings on growth from other economies have boosted expectations that monetary policy will tighten more quickly in the United States than elsewhere.

Chinese buyers stick to sidelines
Friday's drop in prices did little to spark interest among normally price-sensitive Asian buyers of physical metal, dealers said. In China, the world's biggest buyer of gold, local prices slipped to a discount to the global benchmark.

"Chinese demand was again a little disappointing considering how much lower we are trading, with modest volume going through the benchmark AU9999 kilobar contract," precious metals house MKS said in a note on Monday.

"Premium was also disappointing with the SGE trading at a discount of around $0.50-1.00 for the first hour of trade, clearly reflective of their lack of interest." Hedge funds and money managers cut their bullish long position in gold in the week up to October 28, the Commodity Futures Trading Commission said on Friday.

Outflows from SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, accelerated in October, with holdings of the fund now at a six-year low. Among other precious metals, silver was down 0.4 per cent at $16.07 an ounce.

Platinum group metals rose, meanwhile, with spot platinum up 0.8 per cent at $1,238.25 an ounce and spot palladium up 1.9 per cent at $803 an ounce.

Analysts are watching global car sales data for clues on the strength of demand for platinum group metals, which are widely used in autocatalysts.

Toyota Motor Corp, one of the world's biggest carmakers, and its two Chinese joint ventures reported at 27.1 per cent rise in Chinese vehicle sales in October.

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First Published: Nov 03 2014 | 10:32 PM IST

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