Gold and silver languished near their lowest level in six years on Tuesday, while platinum dipped to a seven-year low on a strong dollar and growing expectations that the Federal Reserve would increase U.S. interest rates next month.
Outflows from exchange-traded funds backed by the metals, all non-interest-paying assets, as investors position for a rate hike are also hurting prices.
Spot gold ticked up 0.1 percent to $1,070.30 an ounce by 0330 GMT, but not too far from last week’s low of $1,064.95, the weakest since February 2010.
Silver eased 0.4 percent, after slumping to $13.86 on Monday, the lowest since August 2009. Platinum on Tuesday hit $835.55, its lowest since December 2008.
“Speculators expect a rate rise next month, so people are dumping their gold. The longs are liquidating,” said Ronald Leung, chief dealer at Lee Cheong Gold Dealers Ltd in Hong Kong, adding that a reversal in dollar strength could help prices.
The dollar hit an eight-month high on Monday on hopes of a rate hike. A firm greenback makes dollar-denominated commodities more expensive for holders of other currencies.
San Francisco Fed President John Williams on Saturday cited a “strong case” for raising rates when Fed policymakers meet next month, as long as U.S. economic data does not disappoint, echoing other officials.
Nonfarm payrolls data earlier this month also supported views of a strong economy. “Physical demand is a little bit supportive of gold price for the time being but it is not aggressive,” Leung said.
Sustained strong physical demand in top consuming region Asia tends to provide a floor to falling prices. Premiums on the Shanghai Gold Exchange, a proxy for physical demand in China, were at $5 an ounce on Tuesday, versus $3-$4 in the beginning of the month.
Investment demand, however, was lacklustre. Assets in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), tumbled to 655.69 tonnes on Monday, the lowest since September 2008.
Holdings of platinum ETFs are at a two-year low, while assets in palladium funds are close to their lowest since April 2014. “The recent PGM (platinum group metal) price weakness is more dollar and investor sentiment driven,” said HSBC analyst James Steel.
“While the near-term path of least resistance appears lower we believe PGMs are close to plumbing the lows.