Gold Has Biggest Weekly Loss Since August on Renewed Fed Concern

  • Fed-fund futures show 50% chance of rate increase in December
  • Bullion, silver seen trading lower in December, Dragosits says

Gold posted the biggest weekly decline since August amid renewed concern that the Federal Reserve will raise interest rates in December.

Fed policy makers signaled they’re still considering tighter monetary policy for this year, surprising many gold investors who had been buying on speculation that a spate of uneven U.S. economic data would keep rates low for longer. Fed-fund futures show 50 percent odds of a rate increase in December, up from 36 percent a week earlier.

Bullion fell for the past five quarters amid signs the U.S. economy may be resilient enough to weather a global slowdown and the first rate increase since 2006. Higher rates curb the metal’s appeal because it doesn’t pay interest. While a report on gross domestic product Thursday showed the U.S. economy pulled back in the third quarter as companies cleared out inventories, it also indicated buoyant consumer and business spending.

Gold fell after “the very hawkish statement from the FOMC and the GDP report, which had pretty good underlying details,” Mike Dragosits, a senior commodity strategist at TD Securities in Toronto, said in a telephone interview. “Our view is that gold and silver are heading lower as we head into December.”

Gold futures for December delivery slipped 0.5 percent to settle at $1,141.40 an ounce at 1:43 p.m. on the Comex in New York, after touching $1,138.40, the lowest since Oct. 9. Prices dropped 1.8 percent this week, the most since Aug. 28.

Economic growth slowed to a 1.5 percent annualized rate in the third quarter after a 3.9 percent pace in the previous three months. Had it not been for the biggest inventory swing since 2011, the economy would have expanded 3 percent. A separate report on Thursday showed initial jobless claims near a four-decade low.

“The real U.S. economy isn’t weak, which places pressure on precious metals,” Huatai Great Wall Futures Co. said in a note on Friday. The data “supports the Fed’s view that the economy is expanding at a ‘moderate’ pace.”

Silver futures were little changed on the Comex. On the New York Mercantile Exchange, palladium futures rose while platinum futures fell.

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