Gold prices fell on Wednesday as investor appetite for riskier assets such as equities and crude oil recovered slightly, denting demand for bullion, often considered a safe haven.
Gold prices ended the U.S. day session moderately lower Wednesday. A slumping crude oil market this week is weighing on the precious metals and the raw commodity sector, in general. December Comex gold was last down $6.40 an ounce at $1,267.20. December Comex silver was last down $0.165 at $17.615 an ounce.
The key “outside markets” on Wednesday saw Nymex crude oil prices lower, hit a three-week low, and dropping back below the key $50.00-per-barrel level. There are growing doubts among oil market watchers that OPEC will be able to effectively lower its collective crude oil output. Meantime, the U.S. dollar index was slightly lower on mild profit taking after hitting an 8.5-month high Tuesday. Still, the recent strong greenback is somewhat limiting buying interest in the raw commodity markets, including the precious metals.
Also likely to bolster gold was a pick-up in demand ahead of Indian festivals this month such as Dhanteras and Diwali, a time when gold is traditionally given as a gift as well as the Indian wedding season.
"A recovery in physical demand provided the foundation for the rally that carried over into later trading," HSBC analyst James Steel said in a note.
China will keep importing gold even as the country’s output of the metal rises, says Commerzbank. Analysts cite a report last week from the Ministry of Industry and Information Technology, which projected the country’s gold supply and gold demand up to the year 2020. “According to its figures, gold production is set to increase from 450 tonnes last year to 520 tonnes in 2020,” Commerzbank says. “Gold demand is expected to grow during the same period from 986 tonnes to 1,200 tonnes, which points to high Chinese gold imports in the long term. After all, there is obviously a big gap between supply and demand in China, with demand growth set to outpace supply growth in the projection period.” China, along with India, is one of the world’s two biggest gold-consuming nations.
The Federal Reserve will probably raise rates in December and twice more in 2017, boosting the dollar and hurting gold, according to Singapore-based Oversea-Chinese Banking Corp., the most accurate bullion forecaster in the third quarter.
Gold will retreat each quarter next year, dropping to $1,100 an ounce in the final three months of 2017, Barnabas Gan, an economist at the lender, wrote in a commodities report. The metal for immediate delivery traded at $1,266.74 an ounce on Wednesday, about 15 percent above the target for the end of next year.
Reference: Reuters,Bloomberg,Kitco
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