Dollar Rise with Interest Rate Hikes

Gold Slides with Silver to Lowest Since 2010

Gold tumbled to the lowest since 2010 as a stronger dollar cut demand and investors’ holdings in bullion-backed funds dropped to a five-year low. Silver headed for the longest run of losses in 19 months.

The Dollar Spot Index climbed toward the highest close in five years as Republicans gained control of the Senate from the Democrats in U.S. midterm elections and Bank of Japan Governor Haruhiko Kuroda said he saw no limit to the steps the central bank may take to defeat deflation. The BOJ said last week it would add stimulus.

The Federal Reserve is moving closer to raising interest rates just as other central banks seek to spur their economies. Rising rates reduce gold’s allure because bullion generally offers investors returns only through price gains, while a stronger dollar typically cuts demand for a store of value. Gold is set for the first back-to-back annual declines since 2000 as bullion-backed fund holdings slipped 6.8 percent this year.

“As long as the U.S. economy stays on track and the dollar remains strong, the metals will continue to stay under pressure,” David Govett, head of precious metals at Marex Spectron Group in London, said in a note. “The only positive in a sea of precious negativity is the fact that the markets are getting themselves shorter and shorter the lower we go. At some point there will be a short-covering move,” he said, referring to closing out bets on lower prices.

Gold for immediate delivery slid 1.9 percent to $1,146.34 an ounce by in London. It reached $1,143.76, the lowest price since April 2010. Gold for December delivery declined 2 percent to $1,144.90 on the Comex in New York.

Futures trading volume was triple the average for the past 100 days for this time of day, data compiled by Bloomberg show.

Holdings in gold-backed exchange-traded products fell 3.7 metric tons to 1,643.4 tons yesterday, the lowest since August 2009, data compiled by Bloomberg show. Assets in the SPDR Gold Trust, the biggest ETP, are at the lowest since September 2008, when Lehman Brothers Holdings Inc. collapsed.

Silver for immediate delivery dropped 3.9 percent to $15.4005 an ounce in London, extending declines into a sixth day in the longest run of losses since April 2013. It reached $15.3795, the lowest level since February 2010. Silver ETP holdings dropped 101.3 tons, the most since Oct. 8.

Platinum slipped 2.1 percent to $1,199.38 an ounce, reaching a four-week low. Palladium fell 2.6 percent to $765.50 an ounce.