Yellow metal to post annual losses in 2016

The price of gold has fallen about 10% in 2015 as investors sold the precious metal to buy assets that pay a higher yield

London : Gold edged higher on Thursday as the dollar rally paused but the metal was set to post a third straight annual loss ahead of what is likely to be another tough year with the prospect of higher US rates and dollar strength.

Largely influenced by US monetary policy and dollar flows, the price of gold has fallen about 10 per cent in 2015 as some investors sold the precious metal to buy assets that pay a yield, such as equities.

Spot gold inched up 0.2 percent to $1,062.15 an ounce during the last trading session of the year. Volumes were thin ahead of the New Year holiday on Friday. Prices were set to end 2015 close to a near-six-year low of $1,045.85 hit earlier in December.

"The key factor for gold remains the strong dollar and that ultimately trumps all other issues including the economy and the geopolitics," said Ross Norman, chief executive of bullion broker Sharps Pixley.

The dollar was on track to gain 9 percent this year against a basket of major currencies, making dollar-denominated gold more expensive for foreign currency holders. Other precious metals have also been hit by dollar strength and the gold slump, and were headed for sharp annual declines. Silver, up 0.2 percent at $13.89 an ounce on Thursday, looked set to end the year down about 11 percent.

Industrial metals platinum and palladium were harder hit, heading for yearly losses of 27 per cent and 31 per cent respectively, partly due to oversupply from mines and concerns about demand growth.

Following the US Federal Reserve's first interest rate rise in nearly a decade this month, and indications the central bank would resort to gradual increases in 2016, the gold outlook does not look bullish.