The prospect for higher US interest rates sent gold to the lowest level in more than five years.
Gold bullion slid 2.2 percent to $1,106.50 an ounce in afternoon trading Monday in New York.
Investors have soured on precious metals as the dollar has emerged as the champion currency with the Federal Reserve closer to raising rates for the first time since 2006. AngloGold Ashanti Ltd. sank to a record in Johannesburg, while Canada’s Barrick Gold Corp. dropped to the lowest since 1990. “We’ve seen a resumption of a rally in the dollar and if you do the math, that’s bad for commodity prices,” said Peter Sorrentino, a Cincinnati-based fund manager at Huntington Asset Advisors Inc., which oversees $1.8 billion. “The implications there for the hard asset part of the global economy is pretty abysmal looking out to the rest of the year.”
Advertisement
Fed Chair Janet Yellen has signaled the central bank may raise interest rates this year on the back of an improving US economy. Higher borrowing costs curb the attractiveness of commodities such as gold, which doesn’t pay interest or give returns like assets including bonds and equities.
Gold prices tumbled 2.5 percent last week, the most since March, as China on Friday revised the size of its gold reserves to show holdings below what had been estimated by analysts. The SPDR Gold Trust, the world’s largest exchange-traded gold fund, dropped 2.1 percent to the lowest since 2010.
Gold’s rout sent commodity producers tumbling around the world. Newmont Mining Corp. sank 12 percent and Freeport-McMoRan Inc. lost 5 percent to lead declines in the S&P 500. Randgold Resources Ltd. paced losses in Europe, while South Africa’s AngloGold Ashanti was the worst performer among emerging equities.