Gold Touches Seven-Week Low as Bets Climb on Fed Rate Increase

  • Holdings in bullion-backed funds fell most since September
  • Fed officials says U.S. rates may rise as soon as next month

Gold fell to a seven-week low as investors sold the most metal from bullion-backed funds since September in anticipation of higher U.S. interest rates.

Global holdings in gold exchange-traded products dropped 6.3 metric tons on Wednesday, the most since Sept. 1, data compiled by Bloomberg show. Assets now total a six-week low of 1,524.4 tons. Increasing borrowing costs next month is a “live possibility,” Federal Reserve Chair Janet Yellen said in testimony on Wednesday. Higher rates cut the appeal of the metal, because it doesn’t pay interest of give returns like other assets such as bonds or equities.

More than $6.7 billion has been wiped from the value of gold ETPs in 2015. Prices are trading near the lowest in five years as signs of resilient U.S. growth cut demand for the metal as a haven and increase the chances that Fed officials will raise rates soon. Economists at JPMorgan Chase & Co. and High Frequency Economics Ltd. said that the central bank will press ahead next month with tightening policy if a government report on October job growth due Friday averages the roughly 180,000 increase for payrolls that analysts project.

“Everything is about the Fed and that it looks like they’re finally going to raise interest rates, unless we get a real disappointing jobs number tomorrow,” James Cordier, the founder of Optionsellers.com in Tampa, Florida, said in a telephone interview.

Gold futures for December delivery slid 0.2 percent to settle at $1,104.20 an ounce at 2:00 p.m. on the Comex in New York, after falling to $1,103.60, the lowest since Sept. 16. Prices touched a five-year low of $1,073.70 in July.

Silver futures for December delivery lost 0.5 percent to $14.983 an ounce on the Comex, after touching $14.91, the lowest in a month.

On the New York Mercantile Exchange, palladium for delivery in December dropped 2.7 percent to $606.30 an ounce, after touching $602.80, the lowest since Sept. 22. The commodity dropped a fourth straight day, the longest slump since Aug. 26. Palladium for immediate delivery plunged as much as 4.2 percent to $602.70 an ounce.

Platinum futures for January delivery lost 0.2 percent to $953.10 an ounce on the Nymex.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE