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Published: Wed, November 23, 2016
Economy | By Melissa Porter

Gold holdings decline for eighth day as Fed rate increase looms

Gold holdings decline for eighth day as Fed rate increase looms

Gold prices on Tuesday slipped back to their lowest levels since February, a day after posting their first gain in four sessions, as some strength in the USA dollar and broad gains in the stock market dulled investor interest in the metal.

Spot gold was up 0.3 percent at $1,217.35 an ounce by 1114 GMT, though analysts saw the gains as short-lived. In the previous session, the metal fell as much as 1 percent to mark its lowest since May 30 at $1,203.52.

Gold has fallen more than $120 from its post-U.S. election peak on November 9 as U.S. Treasury yields posted their biggest two-week rise in more than five years and the dollar shot higher. "However, with the market increasing bets on a December rate hike in the United States, this buying is unlikely to persist in the short-term", ANZ analysts said in a note".

Gold is priced in dollars and becomes more affordable to holders of other currencies when the dollar declines.

The U.S. dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, was at 101.02, holding below the 13-and-a-half year high of 101.54 set on Friday.

"There are chances for prices to weaken below $1,200 in the next few weeks leading into the Federal Open Market Committee (FOMC) meeting", Hynes added. The expected rise in USA interest rates in December is also preventing gold from gaining further, traders said.

Markets now put a 90 percent chance on the Fed hiking rates by 25 basis points on December 14. Minutes of the USA central bank's November policy meeting due on Wednesday are likely to confirm that officials were creeping closer to an interest-rate increase.

Copper prices have risen around 15% so far this month on expectations of rising demand from China and an increase in infrastructure spending in the USA when Donald Trump becomes president.

But the us dollar weakened on Tuesday, supporting bullion.

"I think there's probably a re-evaluation of the pro-risk mentality that we've seen over the last couple of weeks". "Gold kept its head above water, with technical-based buying supporting the market".

Speculators cut their net long position in COMEX gold for the first time in four weeks, in the week to November 15, and also reduced it in silver, U.S. Commodity Futures Trading Commission data showed on Friday.

The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings fell 0.71 percent to 908.77 tonnes on Monday.

Platinum was 1.6 per cent higher at $US93.10 and palladium was up 0.3 per cent at $US726.78.

Palladium was up 0.7 percent at $733.48, after touching its strongest since August 10 at $742.20.

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