LONDON: Gold fell more than one percent yesterday, heading for its first weekly drop in four, hurt by sharply lower oil prices and dollar strength, while traders remained cautious ahead of a referendum on Swiss bullion reserves this weekend.
Spot gold was down 0.8 percent at $1,181.46 an ounce at 1558 GMT, having earlier touched a low of $1,177.84. US gold futures for December delivery were down $17.10 an ounce at $1,180.40.
Oil prices posted their sharpest losses since 2011 on Thursday after Opec refrained from cutting its output following a more than 30 percent plunge in prices since June. Oil steadied on Friday, but prices remain near four-year lows.
A broad-based rally in the dollar, in which gold is denominated, also hurt prices. The dollar rose versus commodity currencies such as the Canadian dollar and Norwegian crown on OpecC’s decision not to reduce output.
“It looks like a dollar story day today,” Ross Norman, chief executive of Sharps Pixley, said. “There may also be some long liquidation ahead of the Swiss vote.”
Traders are awaiting the outcome of a referendum in Switzerland on Sunday on a motion to force the Swiss National Bank to raise gold holdings to 20 percent of its foreign exchange reserves, repatriate its bullion and undertake never to sell it.
“The likelihood of this going through is pretty remote, and we have had a reasonable move up before that, so I suspect that’s what’s taking the shine off gold going into the weekend,” Norman said.
A surprise “yes” vote could prompt the Swiss central bank to buy about 1,500 tonnes of gold over the next few years, analysts say.
“The market appears not to have priced in the chance of a ‘yes’ vote, and we expect the risks for the Swiss franc and gold are skewed to the upside,” ETF Securities said in a note.
Elsewhere, India has decided to scrap the rule that required trading companies to export 20 percent of the gold they imported, known as the 80:20 scheme, local television channels reported on Friday, citing government sources.
Reuters
