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Gold has surrendered all of its gains for the year as investor attention focuses on a strengthening US dollar and the timing of the first US interest rate rise in nearly a decade.
Bullion started the year at $1,183 a troy ounce and went on to reach $1,300 by the middle of January as the European Central Bank prepared to launch quantitative easing and the leftwing Syriza party raced ahead in the Greek election, which it went on to win.
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Since then gold has been in retreat. It hit a three-month low of $1,166 on Friday as the US dollar hit an 11-year high against a basket of currencies following the release of robust US jobs data. The employment data for February has bolstered expectations that the US Federal Reserve could start increasing rates as soon as June.
Following Friday’s $32 decline, gold fell further on Tuesday to $1,156.90 an ounce.
UBS analyst Joni Teves said prices below $1,200 could encourage more activity across physical markets, although gold was vulnerable to further declines.
“According to historical patterns, physical demand tends to be slow during this period, but some restocking in China and the anticipation of the Akshaya Tritiya festival in India in late April could offer some support to the market in the weeks ahead,” said Ms Teves in a report.
Looking further ahead, Ms Teves said investors would increasingly focus on US monetary policy and the Fed’s meeting in June, when many economists expect the first interest rate rise to occur.
“We have been arguing that although Fed normalisation is largely anticipated, there’s been uncertainty around the timing and pace of the rate hike,” she said.
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Apple’s launch of an 18-carat gold watch also failed to lift bullion, despite fevered speculation about how much of the precious metal it will actually contain.
The company’s chief, Tim Cook, said on Monday the Apple Watch Edition would start at $10,000. But it remains unclear how much of standard gold the watch will actually use.
The differential in weight between the gold and stainless steel versions suggests at a rough approximation the gold watch contains just under 1 ounce of gold, Matthew Turner, an analyst at Macquarie, said.
The website Apple Spotlight estimated the price of gold in the watch could be around $1,490-$2,235, while Greg Koenig, co-founder of Luma Labs, estimated that the gold content could be 29.16 grams (0.94 troy ounces). Other more excitable commentators have said Apple could buy up to a third of the world’s annual gold production for its new timepieces.
However, analysts have noted a patent application by Apple for a new type of gold, dubbing it “Apple Gold”, and the company’s head of design, Sir Jonathan Ive, told the Financial Times that the molecules in Apple Gold are closer together, making it twice as hard as standard gold.
“I don’t think anyone will see this as a game changer. It needs to contain a lot of gold and sell a lot of units,” Mr. Turner said. “One of those might happen, but both probably not.”
