November 30, 2015
Gold Heads for Worst Month Since 2013 as Central Banks Diverge
(Bloomberg) - Gold traded near a more than five-year low on prospects for further divergence in monetary policy between the U.S. and Europe, with the Federal Reserve expected to raise interest rates next month while the European Central Bank adds stimulus.
Bullion for immediate delivery fell 0.1 percent to $1,056 an ounce at 10:54 a.m. in Singapore after dropping on Friday to $1,052.83, the lowest level since February 2010, according to Bloomberg generic pricing. Prices have retreated 7.5 percent this month, set for the biggest loss since June 2013. Platinum slumped as much as 1.2 percent to $825.65, the lowest since December 2008.
Gold is headed for a third annual decline as the prospect of higher U.S. borrowing costs buoys the dollar and prompts investors to cut holdings. Non-farm U.S. payrolls data for November this week will help to shape the Fed policy makers’ decision on rates next month. On Thursday, the European Central Bank may reduce its deposit rate and expand the region’s asset-purchase program to assist the area’s recovery.
“Greenback strength is clearly not friendly to gold prices,” said Bernard Aw, a strategist at IG Asia Pte in Singapore, adding that policy divergence between the U.S. and Europe may boost the dollar. “Certainly the nonfarm payrolls data this Friday will be closely watched too, given that it is the last jobs data before the December” meeting of U.S. policy makers, he said.
Fed Chair Janet Yellen is scheduled to appear before Congress this week in comments that will be scrutinized for clues on the outlook for policy. Higher U.S. rates boost the dollar and reduce the allure of gold because it doesn’t pay interest. The Bloomberg Dollar Spot Index traded on Monday near the highest level in more than a decade.
Bullion of 99.99 percent purity lost as much as 1.4 percent to a three-month low of 217.60 yuan a gram ($1,058.15 an ounce) on the Shanghai Gold Exchange. Palladium and silver retreated on global markets.