MTS Help Center

Gold was on track for its biggest monthly decline since June 2013, largely pressured by an imminent U.S. interest rate hike by the Federal Reserve in December on expectations of improving economic growth.

Spot gold on Wednesday was nearly unchanged at $1,188.86 an ounce by 0627 GMT. U.S. gold futures were flat at $1,187.90 per ounce. Spot gold was down 6.83 percent so far this month.

The worst is yet to come. At least that’s the opinion of the top two gold forecasters who say bullion will suffer further losses in 2017 as interest rates climb and the dollar strengthens.

Oversea-Chinese Banking Corp. and ABN Amro Group NV see gold sliding to $1,100 an ounce by the end of next year as the Federal Reserve tightens monetary policy, real Treasury yields increase and the U.S. currency rises. Prices were at $1,190.28 on Wednesday. The banks were ranked first and second as gold forecasters in the third quarter, according to data compiled by Bloomberg.

“From an investor point of view there is little reason to hold gold,” said Georgette Boele, a currency and commodity strategist at ABN Amro. “Rising inflation expectations are more than countered by the rise in U.S. Treasury yields and expectations about upcoming rate hikes by the Fed. As long as real yields rise and there are no major inflation fears, prices will go lower.”

Not everyone is bearish going into 2017. Bullion may average $1,300 next year, says Robin Bhar, head of metals research at Societe Generale SA in London, the third-best gold forecaster in the data compiled by Bloomberg.

“All in all, gold prices are at the mercy of risk appetite. Buying on dips is likely to provide support given a view that gold is a good portfolio diversifier, hedge, insurance policy,” Bhar said in an e-mail last week. At the same time, he acknowledged the downside risks because changes in fiscal policy could push real interest rates higher, offsetting haven demand.

Gold is set for its worst month in more than three years, with investors dumping bullion at the fastest pace since 2013. Assets in bullion-backed exchange-traded funds have shrunk 5.3 percent in November, the biggest monthly drop since June of that year. Billionaire Stan Druckenmiller sold all his gold on election night. “All the reasons I owned it for the last couple of years seem to be ending,” he said in a CNBC interview shortly after the vote.

In the month through Monday, investors pulled $4.4 billion from exchange-traded funds backed by precious metals, the biggest redemption among all asset classes offered in such funds globally that are tracked by Bloomberg. Money is moving out of gold and other precious metals as U.S. equities rally to a record and traders boost bets on further rate increases.

Reference: Bloomberg, Reuters