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Oil slump keeps gold under pressure in thin trade
Highlights
Gold struggled to recover from overnight losses on Tuesday as a relentless slide in oil prices dented demand for the metal, often seen as an inflation-hedge.
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Gold struggled to recover from overnight losses on Tuesday as a relentless slide in oil prices dented demand for the metal, often seen as an inflation-hedge.
Spot gold XAU= was little changed at $1,070.05 an ounce by 0116 GMT, after losing 0.6 percent in the previous session. Volumes remained thin in the last trading week of the year.
In the absence of strong trading cues and liquidity, gold is likely to remain range-bound for the remainder of the week, tracking oil and currency markets.
"Over the short-term, the precious metal will likely trend sideways, as funds look to close out the year and contemplate heading into next year with a fresh slate," said INTL FCStone analyst Edward Meir.
Gold was sold off on Monday as oil fell more than 3 percent, with global benchmark Brent back near 11-year lows as last week's short-covering dried up and players worried that crude prices had more room to swoon in the new year. [O/R]
Oil prices were lower in early Asian trading on Tuesday.
Demand for gold slips with oil as the metal is seen as a hedge against oil-led inflation.
The oil slump more than offset any benefits the metal could have seen from a slide in the dollar.
The greenback fell to a more than one-week low against a basket of major currencies on Monday. [USD/] A softer dollar makes dollar-denominated gold cheaper for holders of other currencies.
With a near 10 percent drop, gold looked set to post its third straight annual loss, following a 12-year rally that ended in 2013.
Fundamentals for the metal were not bullish, with the dollar expected to strengthen as the Federal Reserve hikes U.S. interest rates gradually next year. Higher rates lowers demand for non-interest-paying gold.
Assets of SPDR Gold Trust (GLD), the top gold-backed exchange-traded fund, fell 0.18 percent to 643.56 tonnes on Monday, close to a seven-year low.
Speculators' short positions in COMEX gold contracts are near an all-time high, though data on Monday showed they had reduced the record bearish stance in the week to Dec. 22.
The technical picture also looked weak.
A breach of $1,067 an ounce could send the metal all the way to a multi-year low of $1,048, said ScotiaMocatta.
"December has been a sideways move for the metal with a series of lower tops. Risk remains lower, we do not see stop loss buying of the metal until a break of $1,081 and $1,088," it said.
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