Gold hit a six-month low on Friday, on course for its largest annual loss in 32 years, as the US Federal Reserve’s first step away from ultra-loose monetary policy further undermined the investor case for holding bullion.
The Fed this week scaled down an era of easy money that saw gold rally to an all-time high of $1,920.30 an ounce in 2011. The metal lost 2.3 per cent in the previous session, making it the major financial benchmark hardest hit by the US Fed’s taper, which will raise the opportunity cost of holding non-yielding gold. “If you look at the global economy and the outlook for monetary policy ... we are in an environment where we are going to need a much bigger problem in the world than we foresee for gold to recapture any of its lustre,” Baring Asset Management investment manager Andrew Cole said.
Spot gold hit its lowest since June on Friday at $1,185.10 an ounce, closing in on a 3-1/2-year low touched earlier that month, after the Fed first cast doubt on the scope of its stimulus.
The market clawed back some ground, up 0.6 per cent at $1,196.40 on pockets of physical buying, but remained vulnerable to further losses. US gold futures for February delivery rose $1.20 an ounce to $1,194.70. Prices are down around 3 per cent this week, and some 29 per cent year-to-date, halting a 12-year run of gains. As a gauge of investor sentiment, holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 3.90 tonnes to 808.72 tonnes, the lowest in nearly five years.