Gold set for worst year since 2015 on fading safe-haven demand

Gold was set for its worst year since 2015 on Friday as a global economic recovery caused safe-haven flows into the metal to ease and as central banks prepared to raise interest rates to contain inflation.

Spot gold rose 0.1 per cent in thin trading to $1,817.57 per ounce by 0846 GMT, hovering close to a one-month high. US gold futures rose 0.3 per cent to $1,818.90.

“Year-end risk hedging has pushed gold higher overnight and is keeping gold supported in Asia, despite a modest US dollar rally overnight. Gold is now just below resistance at $1,820,” said Jeffery Halley, a senior market analyst at OANDA.

A stronger dollar (.DXY) makes bullion more expensive for buyers holding other currencies.

Gold prices have declined more than 4 per cent so far this year after rising 48 per cent over the previous two years, as the global economic recovery reduced demand for the safe-haven metal.

This year gold traded between $1,676 and $1,959 an ounce, following its best annual performance in a decade last year, which also saw the metal touching an all-time high of about $2,072.50.

“Gold held up reasonably well given all the pro-growth development and all the normalisation in monetary policy,” said Dominic Schnider, head of commodities and APAC forex at UBS Wealth Management in Hong Kong.

“You could argue that if we did not have inflation, gold prices would already be much lower,” said Schnider, adding that gold’s performance for the year was quite positive for euro or yen investors.

Spot silver rose 0.3 per cent to $23.11 an ounce and platinum rose 0.2 per cent to $962.90, while palladium fell 1.1 per cent to $1,9444.32.

Silver was on track for its worst year since 2014, falling over 12 per cent. Platinum dropped more than 9 per cent, and palladium was headed for its biggest yearly decline since 2015 with an over 20 per cent slide.