Gold Falls as U.S. Economic Data Fuels Bets on Fed Rate Increase

  • Investor attention returns to when Fed will raise rates
  • Platinum futures touch the lowest level since late 2008

Gold fell to near a five-year low as stronger-than-expected U.S. economic data boosted speculation that the Federal Reserve will raise interest rates before the end of this year, damping the metal’s appeal as a store of value.

Orders for business equipment in the U.S. climbed more than economists forecast in October, indicating steady domestic demand, and jobless claims dropped to the lowest in a month. The data add to signs the economy may be strong enough to withstand higher rates, which damp the appeal of gold because it doesn’t pay interest, unlike competing assets.

Gold has fallen the last five weeks, the longest stretch of losses since July. Fed-fund futures show a 74 percent change that officials will tighten monetary policy by their Dec. 15-16 meeting. San Francisco Fed President John Williams said on Saturday that there’s a “strong case” for a December rate increase if U.S. data hold up.

“Gold reacted lower as, on balance, the data released was stronger than expected, doing nothing to change the view that the Fed is in line for a December hike,” Tai Wong, the director of commodity products trading at BMO Capital Markets Corp. in New York, said in a telephone interview.

Gold futures for February delivery dropped 0.3 percent to settle at $1,069.70 an ounce at 1:42 p.m. on the Comex in New York. The metal touched a five-year low of $1,062 on Nov. 18.

Holdings in gold-backed exchange-traded products fell for a fifth straight day to 1,494.28 metric tons on Tuesday, data compiled by Bloomberg show. Assets are at the lowest since February 2009.

Silver futures for March delivery slid 0.1 percent to $14.175 an ounce on the Comex.

On the New York Mercantile Exchange, platinum futures for January delivery added 0.3 percent to $843.90 an ounce, after earlier falling 1 percent to $833.50, the lowest since 2008. Palladium futures for March delivery climbed 1.8 percent to $552 an ounce.

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