Gold extends end-of-year rally, set for best month since August

Year of the (golden) pig. Credit: bebouchard via Flickr

Spot Gold advanced, heading for its best month since August, as the dollar weakened and funds plowed more money into exchange-traded funds backed by the metal.

The euro gained for a fourth day as the dollar declined against all its Group-of-10 peers, bolstering the appeal of bullion as an alternative asset. Prices are up for a fifth session in six and heading for its biggest annual gain since 2010. Meanwhile, global holdings in gold-backed ETFs expanded 6.3 tons last week after a 7.2-ton build the prior week, according to data compiled by Bloomberg. Assets have risen 14% this year.

The strong bullish momentum is “largely due to U.S. dollar weakness,” said Benjamin Lu, an analyst at Phillip Futures Pte in Singapore. The Federal Reserve’s dovish monetary policy “has softened greenback prospects considerably while bolstering bullion’s appeal.”

A gauge of the greenback is set for the biggest quarterly loss since the first three months of 2018. After cutting rates three times this year, the Fed’s rate-setting Federal Open Market Committee is expected to stay on hold through 2020. The central bank is also on watch this week to prevent any repo market disruption.

“Amid a low-trading environment, lower is the path of least resistance for the USD,” said Rodrigo Catril, senior foreign-exchange strategist at National Australia Bank Ltd. in Sydney. “Abundant USD liquidity — courtesy of the Federal Reserve — is pushing short-dated U.S. yields lower.”

Spot gold rose 0.3% to $1,515.47 an ounce as of 11:28 p.m. in New York, extending its December gain to 3.5%. The metal is up 18% this year. The Bloomberg Dollar Spot Index fell to the lowest since July.

Comex gold for February delivery was little changed at $1,518.40. In the gold-options market, February $1,525 calls were most actively-traded, with 3,010 contracts changing hands.

Minutes from the Fed’s December meeting will be released on Friday, with investors on the lookout for more color on the thinking behind the unanimous decision to keep rates on hold after the three cuts in 2019, and on policy makers’ apparent preference to keep them steady next year.

Still, Phillip Futures’ Lu said he expects that gold will “soften considerably” in 2020 as investors ease up on havens and pivot toward interest-bearing assets amid rising U.S. bond yields and robust risk appetites.

Silver and platinum climbed on the final Monday of the year. Spot silver added 1%, extending this year’s gain to 16%, and platinum rose 1.5% for an annual advance of 21%. Palladium, which was little changed, has come out tops for annual performance by some distance, with a 51% rally.

(By Ranjeetha Pakiam, with assistance from Ruth Carson and Yvonne Yue Li)

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