Gold edges lower, heads for sixth straight quarterly loss

Gold edged lower yesterday in line with a retreat in oil prices, giving up some of last week’s gains, but moves were muted in thin liquidity in a holiday-shortened week.

Gold rose nearly 1 percent during Christmas week, but remains on track to fall for a sixth successive quarter, its longest run of quarterly losses since the mid-1970s. It is down 9 percent this year.

Spot gold was down 0.5 percent at $1,070.81 an ounce at 1440 GMT, while U.S. gold futures for February delivery were down $5.40 an ounce at $1,070.50.

Prices hit their lowest since early 2010 this month in anticipation of the first U.S. interest rate rise in nearly a decade. Though gold recovered lost ground in the wake of the announcement as dealers holding short positions covered, it remains under pressure, awaiting more clues on monetary policy.

“If you look at the last year’s decline, that was due almost exclusively to a much stronger dollar, and that was due to the Fed being the only central body to raise rates with any conviction,” ING analyst Hamza Khan said.

“The question of whether gold is going to recover in 2016 or not will depend not on whether the Fed hikes rates or not, because that seems to be a given, but whether it is the only one to hike rates.”

Oil prices fell more than 2 percent after the long Christmas weekend, with international crude and product markets still well supplied. Gold is positively correlated to oil as the metal is seen as a hedge against petroleum-led inflation.

Weakness in oil pressured shares in Europe and Asia in thin holiday trade in a number of financial centers. The dollar was little changed, with the London currency market among those still closed.

“Gold is drifting lower after failing to extend the pre-Christmas rally,” Saxo Bank’s head of commodity research Ole Hansen said. “Although the near-term direction of the dollar is pointing higher, the lack of dollar strength this December has supported gold primarily through the covering of short positions.”

Interest in gold was muted in the major bullion-buying centers in Asia overnight, dealers said.

Data on Monday showed China’s net gold imports from main conduit Hong Kong rose in November from a month before as demand for the metal increased with a drop in prices to multi-year lows.

Silver was the biggest faller of the main precious metals, down 2 percent at $14.05 an ounce. Platinum was down 0.4 percent at $877.99 an ounce, while palladium was down 0.3 percent at $557.01 an ounce.