Gold rally stalls as firmer dollar hits commodities

FE Team | Published: October 11, 2014 00:00:00 | Updated: November 30, 2026 06:01:00

LONDON, Oct 10 (Reuters) - Gold steadied on Friday as a rise in the dollar capped four days of gains, though the metal remained supported by concerns about the prospect of a widespread economic slowdown.
Strength in the US currency drove commodities lower across the board, with Brent crude oil futures earlier tumbling more than 1 per cent towards a four-year low, while worries about the world economic outlook hit stock markets.
Spot gold was flat at $1,223.60 an ounce at 1201 GMT, while US gold futures for December delivery were down $1.40 an ounce at $1,223.90.
"Gold is just following the dollar tick by tick -- if the dollar goes up, gold does the opposite," said Afshin Nabavi, head of trading at MKS.
Gold hit a 15-month low on Monday after strong US jobs data fuelled talk that US interest rates could rise sooner rather than later. Gold has since rebounded, however, and remains on track to post its biggest weekly gain in four months.
"Indian buyers are quite active -- we're just around the corner from Diwali. But the rest of the world is relatively quiet, given that prices, even with this recovery, are cheap," said Nabavi.
The gold recovery gained momentum after minutes of the Fed's September meeting, released on Wednesday, showed that officials are struggling with how to deal with the dual threats of a stronger dollar and a global slowdown.
The minutes prompted investors to bet that the US central bank is in no rush to tighten policy after years of monetary stimulus. Higher interest rates would hurt demand for gold, a non-interest-bearing asset.
The dollar rose on Friday but was still on course to end a record-length rally with its first weekly fall in three months after Federal Reserve policymakers warned about the impact of the currency's strength.
Euro zone bond yields bounced off record lows after top Federal Reserve officials hinted towards an interest rate rise in the middle of next year, reversing some of the bets for a longer period of near-zero rates.
On the main markets for physical gold, dealers reported a pick-up in Indian demand ahead of the Diwali festival, a key bullion-buying period. China had been away on a week-long holiday but its return mid-week provided much-needed support from the physical markets.
Buying eased off a touch at the end of the week, however, dealers said.
"Shanghai opened to some light buying interest through the Shanghai Gold Exchange, however volume was certainly down from the previous few days," MKS said in a note.
"The SGE premium was also a little lower today, reflecting the thinner demand with the kilobar contract trading at around $2.50-$3.50 over spot gold."
Among other precious metals, silver was down 0.1 per cent at $17.28 an ounce, while spot platinum was down 0.5 per cent at $1,257.50 an ounce and spot palladium was down 0.3 per cent at $788 an ounce.
Platinum prices, which tumbled to their lowest in five years on Monday in sympathy with gold, were on track for their biggest weekly gain in a year, up 3.8 per cent.