Gold Rout Sends Global Miners Lower as Commodity Slump Worsens – by Stephen Kirkland and Jeremy Herron (Bloomberg News – July 20, 2015)

The rout in commodities worsened as the prospect for higher U.S. interest rates sent gold to the lowest level in more than five years. Miners posted the steepest losses in benchmark stock indexes around the world, with selling heaviest among resource producers in emerging markets.

Bullion slid 2.4 percent to $1,105 an ounce at 11:40 a.m. in New York, sending the Bloomberg Commodity Index to its lowest since 2002. The euro traded at $1.0854, near a two-month low. The MSCI Emerging Markets Index fell 0.8 percent.

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. Better-than-forecast corporate earnings took the Standard & Poor’s 500 Index within one point of a record.

“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.”

Fed Chair Janet Yellen has signaled the central bank may raise interest rates this year on the back of an improving U.S. 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.

Bonds, Currencies

Treasuries declined, pushing two-year note yields to a three-week high, as St. Louis Fed Bank President James Bullard said the Fed should prepare to raise interest rates this year.

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