Gold extended a drop to a five-year low and headed for the longest run of weekly loses since 2012 as Macquarie said the metal has little appeal as a commodity or alternative to currencies.
The 4.5 percent slide this week would be the fifth straight drop and the most since October. Investors are dumping gold on expectations that the Federal Reserve will soon raise interest rates amid a strengthening economy. Reports Thursday showed an index of US leading economic indicators rose more than forecast in June as jobless claims fell to a four-decade low.
“Gold has always had a dual nature as a currency and a commodity,” Macquarie analysts including London-based Matthew Turner said in a report Friday. “At present it is not desired in either form. The Fed remains on course to raise rates, while physical markets are lacklustre.”
Higher borrowing costs curb the appeal of gold, which doesn’t pay interest or give returns like other assets including equities, and economists are projecting a 50 percent chance for a rate increase in September. Gold’s plunge means six of the world’s 18 biggest miners of the metal are loss-making at current prices, according to Bloomberg Intelligence.
Gold for immediate delivery fell 0.7 percent to $1 083.33 an ounce by 10:27 am in London, according to Bloomberg generic pricing. Prices reached $1 077.40, the lowest since February 2010. Futures for August delivery were 1.1 percent lower at $1 082.10 on the Comex in New York, where trading volume was double the 100-day average for the time of day.
Lower forecast
A gauge of the dollar’s strength advanced almost 20 percent over the past year, cutting demand for the metal as an alternative investment. Macquarie cut its 2016 average gold forecast by 15 percent to $1 163.
Investors are selling the metal from gold-backed funds at the fastest pace in four months. Holdings in the products declined by 17.6 metric tons this week to the lowest since 2009, data compiled by Bloomberg show.
The price slump is hurting mining companies contending with higher production costs. Harmony Gold Mining, Golden Star Resources, DRDGold, Gold Fields, Acacia Mining and IAMGold had all-in costs of more than $1 100 per ounce of gold mined in the first quarter, Bloomberg Intelligence data show.
Silver for immediate delivery lost 0.4 percent to $14.6045 an ounce after touching the lowest this year, and is also set for a fifth weekly loss. Palladium rose 1.1 percent to $625 an ounce, while platinum was little changed at $977.30 an ounce. Holdings of the metal in exchange-traded products are at the highest since November.
Bloomberg