Gold has suffered its worst month since mid-2013, as the election of Donald Trump, the rising dollar and increased expectations of a US rate rise combined to send prices down 8.1 per cent in November.
The fall to $1,173.20 per troy ounce marked the steepest monthly sell-off since June 2013, when the precious metal lost 11 per cent in the wake of the so-called taper tantrum. November’s sell-off saw gold’s year-to-date gains trimmed to 10.7 per cent.
Gold had been tipped to rally in the event of a win by Mr Trump at the US presidential election. Instead, a return of risk appetite driven by expectations that the incoming president would deliver an economic stimulus plan that would spur growth and stoke inflation sent US stocks higher and perceived havens lower.
Bonds also fell sharply, with the Bloomberg Barclays Global Aggregate Total Return index suffering its worst month since its launch in 1990. Government debt, which had in many countries been offering investors negative yields, was hit particularly hard.
Markets are currently pricing a 100 per cent chance of a rate rise by the Federal Reserve in December — another drag on the yellow metal, which offers no yield. Many investors also expect Mr Trump’s policies to accelerate the Fed’s hiking cycle next year.
Altered rate expectations have given fuel to a rally in the US dollar. The dollar index, a measure of the currency against a basket of peers, surged 3.1 per cent during November — another drag on the precious metal which is dollar-denominated, making it more expensive for foreign buyers.
Stronger demand in China — where the renminbi has dropped almost 6 per cent against the dollar this year — has prompted the authorities to curb imports of the precious metal to halt the outflow of capital from the country.
China is the world’s biggest consumer of gold, but if the restrictions on imports are sustained, it could raise questions about Beijing’s moves to open its gold market to international traders.
