Gold on track for $1,000 after worst day in nine months

Thu Dec 17, 2015 6:37pm EST
 
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By Marcy Nicholson

NEW YORK (Reuters) - Gold's biggest one-day fall in nine months has put prices on track to test $1,000 per ounce for the first time in six years, technical analysts said on Thursday, deepening a years-long rout as loose U.S. monetary policy comes to an end.

"Right now we have a double bottom, but I don't see that holding," said Adam Packard, vice president of operations at brokerage Zaner Group in Chicago.

"If we close below $1,045 tomorrow ... I see more people throwing in the towel."

On Thursday, COMEX gold futures for February delivery GCcv1 settled down 2.5 percent at $1,049.60 an ounce after the U.S. dollar .DXY surged in response to the U.S. Federal Reserve's decision on Wednesday to raise interest rates for the first time in nearly 10 years.

Higher rates weigh on bullion by lifting the opportunity cost of holding such a non-yielding asset.

Gold has fallen more than 11 percent so far in 2015, hitting its lowest in six years largely on speculation that monetary policy will tighten. Prices are down around 45 percent from all-time highs of $1,943 hit in 2011.

Gold ETFs, which saw huge inflows during the post-2008 financial crisis, have recorded outflows for three years, while hedge funds' net short positions in COMEX gold futures reached record levels this month.

Technicians noted that bullion's session low of $1,046.80 was just above the Dec. 3 low of $1,045.40, the weakest since October 2009 on a continuation chart.   Continued...

 
Gold rings are seen on display at a goldsmith shop in Kuala Lumpur April 21, 2011.  REUTERS/Bazuki Muhammad