- Short-covering seen as U.S. pending home sales miss estimates
- Bullion has fallen 10 percent this year on Fed rate outlook
Gold advanced for the first time in three sessions as signs of cooling U.S. housing and manufacturing called into question the extent to which the Federal Reserve will raise interest rates.
Contract signings to purchase previously owned homes climbed less than forecast in October after declining the prior two months, according to a private report on Monday. The MNI Chicago Business Barometer unexpectedly contracted in November. The data cast doubt on whether the economy would be strong enough to withstand sustained tightening in monetary policy.
Bullion has fallen 10 percent this year on expectations that the Fed will raise interest rates for the first time since 2006 next month. The dollar has also strengthened against the euro as analysts predict the European Central Bank will unveil additional stimulus this week. Higher U.S. rates boost the appeal of the dollar and curb demand for precious metals because they don’t give returns like other assets such as bonds or equities.
“We’re seeing just a bit of short-covering in response to some significant data that has at least the potential to change the strong outlook for a Fed rate hike later this month,” David Meger, the director of metals trading at High Ridge Futures in Chicago, said in a telephone interview.
Gold futures for February delivery gained 0.9 percent to settle at $1,065.30 an ounce at 1:47 p.m. on the Comex in New York, the first advance since Nov. 24.
Silver futures also gained on the Comex, while platinum and palladium retreated on the New York Mercantile Exchange.