Even its role as an asset is in question, says Macquarie
Updated on
Gold has no appeal as a commodity or alternative to currencies,
Macquarie Group Ltd. said on Friday, renewing the selloff that’s driven
prices to a five-year low.
Futures for August delivery slid 0.9 percent to $1,084.10 an ounce as of 11:54 a.m. on the Comex in New York, after touching $1,072.30, the lowest for a most-active contract since February 2010. The metal dropped 4.2 percent this week, the most since October. Trading volume was 96 percent above the 100-day average for the time of day.
Investors are bailing on gold on expectations the Federal Reserve will soon raise interest rates as the economy strengthens. The price drop has been extreme and it may not be over yet, Macquarie analysts including London-based Matthew Turner said in a report Friday. The bank lowered its 2016 average gold forecast by 15 percent to $1,163.
“The mood is very poor,” Grant Sporre, an analyst at Deutsche Bank AG, said by phone from London. “The feeling is that the metals are pricing in rate cuts in the U.S., but I expect that we’ll still see a further leg down when the event actually occurs.”
Gold has fallen about 8.5 percent this year. Higher borrowing costs curb the appeal of gold, which doesn’t pay interest or give returns like other assets including equities. Economists project a 50 percent chance for a rate increase in September. The Bloomberg Dollar Spot Index has risen 19 percent in the past year.
The plunge means profits at one-third of the producers of the precious metal are under threat, according to Bloomberg Intelligence. Shares of Barrick Gold Corp., the world’s largest producer, headed for the biggest weekly decline since 1987.
Investors are selling the metal from gold-backed funds at the fastest pace in four months. Holdings in exchange-traded products declined 17.6 metric tons this week to the lowest since 2009, data compiled by Bloomberg show.
“Gold has always had a dual nature as a currency and a commodity,” Macquarie wrote in the report. “At present, it is not desired in either form.”
Futures for August delivery slid 0.9 percent to $1,084.10 an ounce as of 11:54 a.m. on the Comex in New York, after touching $1,072.30, the lowest for a most-active contract since February 2010. The metal dropped 4.2 percent this week, the most since October. Trading volume was 96 percent above the 100-day average for the time of day.
Investors are bailing on gold on expectations the Federal Reserve will soon raise interest rates as the economy strengthens. The price drop has been extreme and it may not be over yet, Macquarie analysts including London-based Matthew Turner said in a report Friday. The bank lowered its 2016 average gold forecast by 15 percent to $1,163.
“The mood is very poor,” Grant Sporre, an analyst at Deutsche Bank AG, said by phone from London. “The feeling is that the metals are pricing in rate cuts in the U.S., but I expect that we’ll still see a further leg down when the event actually occurs.”
Gold has fallen about 8.5 percent this year. Higher borrowing costs curb the appeal of gold, which doesn’t pay interest or give returns like other assets including equities. Economists project a 50 percent chance for a rate increase in September. The Bloomberg Dollar Spot Index has risen 19 percent in the past year.
The plunge means profits at one-third of the producers of the precious metal are under threat, according to Bloomberg Intelligence. Shares of Barrick Gold Corp., the world’s largest producer, headed for the biggest weekly decline since 1987.
Investors are selling the metal from gold-backed funds at the fastest pace in four months. Holdings in exchange-traded products declined 17.6 metric tons this week to the lowest since 2009, data compiled by Bloomberg show.
“Gold has always had a dual nature as a currency and a commodity,” Macquarie wrote in the report. “At present, it is not desired in either form.”
