Gold Expected To Continue To Decline In November

Gold held near its lowest in three weeks on Friday and looked set to post its worst week in nearly two months on expectations that the Federal Reserve would raise US interest rates this year. More downside is expected, analysts and traders said, with the looming US rate hike set to hit demand for the non-interest-paying asset, and also as the technical picture has weakened.  Gold ticked up 0.3 percent to $1,148.50, but still not far from a three-week low of $1,140.20 earlier in the week.  On Monday morning gold continued to decline in the Asian session dropping $1.40 to $1140.00.

With the Federal Reserve turning more bullish about the US economy and indicating a rate hike before the end of this year, global gold prices dropped last week. The yellow metal closed at $1,142.1, down close to 2 per cent. SPDR Gold Trust, the largest gold backed exchange traded fund in the world, saw its holdings shrink by 3.28 tonnes to 692.26 tonnes.

The US dollar index rallied up sharply to 97.8 after the Fed’s meeting on Wednesday. But it retreated from the highs and closed the week at 96.94 on Friday. The greenback gave up another 17 points as the new week begins to trade at 96.83. The first estimates of US GDP for the third quarter that were released on Thursday disappointed observers. The number came in at 1.5 per cent, against expectations of a 1.7 per cent growth. However, on Friday, the Chicago PMI turned out to be stronger than expected.

The index rose sharply to 56.2 in October from 48.7 in September, pointing to the improving health of the economy. This undermined gold and had bullion bulls fleeing. Last week, other precious metals were under pressure too. Silver ended at $15.5, down 1.7 per cent and platinum closed at $985, down 1.6 per cent for the week.

This week, the US economic calendar is relatively light. The ISM manufacturing index is expected on Monday. On Thursday, the jobless claims data is expected, followed by employment situation on Friday. The unemployment rate is expected to drop from 5.1 per cent in September to 5 per cent in October. Non-farm payrolls are also expected to increase by 50,000 from September levels to about 189,000.

On Sunday China reported its official manufacturing PMI report, which missed expectation and came in equal to last month at 49.8 showing an ongoing contraction. Copper is trading at was trading in the red at 2.316 and is expected to continue to decline as worries about demand from the world’s largest user continues to plague the markets. Matched with ongoing signs top metals user China is struggling to shore-up growth after a limp response to last week’s rate cut, prices will likely head lower, analysts said.

“What you get from China is still a slowdown but a smaller slowdown. Maybe it’s enough for equities to do well, but I’m not sure it’s enough for copper,” commented an analyst at UBS in Hong Kong, who expects ample copper stocks to drag on prices through the first half of next year. Chinese private data released on Monday by Caixin showed a small jump in small and medium size manufacturing helping to offset the earlier official report.

Meanwhile, investors were also turning less optimistic on the metal. The total net long position of funds trading copper on the LME fell to 14,852 lots last Friday from a net long of 20,532 lots the previous week, the exchange’s Commitments of Traders Report (COTR) showed.

Elsewhere, Russia’s United Company Rusal held its aluminum output steady in the third quarter and reaffirmed it was reviewing some of its operations, as global prices droop to six-year lows. Aluminum prices have struck successive record lows for most of October, including on Thursday, amid energy sector reform in China that has driven down power costs.