Precious Metals Market Report by Bill Musgrave – American Gold Exchange
Gold fell 1.1% to close below $1,195 in a day of volatile trade. After rising to $1,213 early in the session on safe-haven buying in response to Russia’s panicked attempt to support the ruble, the metal then slipped as low as $1,188 as falling oil prices reduced its allure as an alternative store of value.
Russia’s central bank hiked interest rates to 17% from 10.5% in a dramatic effort to support the plummeting ruble. The surprise decision succeeded only in panicking the Russian financial markets, knocking the currency further into freefall with a 19% loss today. The ruble has tumbled 52% this year as plunging oil prices and sanctions by the West have taken their toll.
Gold was pressured by speculation that Russia’s financial desperation might cause it to sell a portion of its gold reserves to raise the hard currency required to support the ruble. Russia has been a consistent gold buyer in recent years, tripling its gold holdings since 2005 to more than 1,185 tonnes, the fifth-most of any nation.
After staging a brief rebound, oil resumed its slide as subpar manufacturing data in China and the U.S. diminished prospects for demand. Falling oil prices tend to weigh on gold because of the latter’s widespread use as a hedge against inflation.
China’s flash PMI showed contracting factory activity last month for the first time since May, adding to expectations that deeper easing will be needed in the world’s second largest economy. U.S. manufacturing is expanding in December at its slowest pace in eleven months, according to Markit, suggesting a weaker fourth quarter GDP.
The other precious metals also finished lower, with silver plunging nearly 5% while platinum and palladium shed 1.5% and 2.3%, respectively.
At the Comex close: February gold fell $13.40 to $1,194.30; March silver dumped 81 cents to $15.75; January platinum lost $18.40 to $1,196.50; and March palladium shed $18.55 to $784 an ounce.