Gold price steadies in thin trading

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Gold steadied on Wednesday, hemmed into a narrow range in thin pre-holiday trade as a recovery in oil prices from 11-year lows offset fresh strength in the dollar.
The metal is up half a percent this week, having risen largely on short covering after last week’s slide which followed the Federal Reserve’s announcement that it was lifting interest rates for the first time in nearly a decade.
However, it has struggled to maintain gains in thin trade despite a recovery in oil prices, as global stocks extended a rally into a third day and the dollar rose 0.4 percent against the euro.
Spot gold was at $1,070.70 an ounce at 1438 GMT, little changed from $1,071.96 late on Tuesday, while US gold futures for February delivery were down $4.00 an ounce at $1,070.10. Investors are reluctant to take positions into year-end, dealers said.
“Since September we haven’t really gotten out of this range, $1,045 on the downside, and $1,085 on the upside,” Afshin Nabavi, head of trading at MKS, said.
“Gold has been stuck in a range for such a long time that no-one wants to do anything with it. At the end of the year, most books are going to be closed.” Gold prices are down 8 percent so far this year in a third straight year of losses, made largely in anticipation of the Fed’s interest rate decision. Rising rates lift the oppportunity cost of holding non-yielding bullion.
Attention is now switching to the speed of rate hikes next year. Signs that the Fed will lift rates at a steady pace could feed into still softer gold prices, analysts said.
“With the growing confidence about the US economic recovery, the Fed would be quite keen to continue monetary policy tightening, albeit only gradually over 2016, followed by a faster pace in the following year,” Societe Generale said in a note.
“This should see the US dollar strengthen over the medium term, putting pressure on dollar-denominated (gold) prices.”
Investor sentiment towards gold remains bearish. Assets of the world’s largest gold exchange-traded fund are near a seven-year low, while short positions on COMEX are at a record high, according to recent US government data.
Support for gold from physical markets also looks bleak. In top consumer China, there are fears of a protracted loss of confidence among buyers, with many predicting that demand could fall for a third year in 2016.
Silver was down 0.1 percent at $14.23 an ounce, platinum was down 0.9 at $862.50 an ounce, and palladium XPD= was down 0.8 percent at $548.10 an ounce.

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