Investors Keep Selling Gold From Funds as Fed Decision Looms

Gold Hovers at Lowest Level Since 2010
  • Gold holdings in exchange-traded products down a ninth day
  • Bullion near five-year low on bets Fed will soon raise rates

Gold investors keep dumping the metal from bullion-backed funds before the Federal Reserve decides whether it will raise interest rates for the first time in almost a decade.

Holdings in exchange-traded products fell for a ninth day to the lowest since February 2009, data compiled by Bloomberg show. Investors sold 49.3 metric tons in November, about three times as much as they bought in the previous three months combined. Tighter monetary policy curbs the appeal of bullion because it doesn’t pay interest.

Gold fell to a five-year low Wednesday amid signs that the economy may be resilient enough to withstand a rate increase. A report Wednesday from ADP Research Institute showed U.S. companies added more workers in November than forecast. The figures, which precede jobs data from the government on Friday, add to signs of a strengthening labor market that has boosted Fed rate bets.

“Traders are going to use the ADP report as a forward indicator of what should happen on Friday, knowing that they’re going to position themselves in anticipation for a rate hike,” Phil Streible, a senior market strategist at RJO Futures in Chicago, said by phone. Gold is “going to continue to sell off here.”

Gold futures for February delivery lost 0.9 percent to settle at $1,053.80 an ounce at 1:44 p.m. on the Comex in New York. The metal, down 11 percent this year, is headed for a third straight annual decline.

Holdings in ETPs slid 0.6 ton to 1,489.8 tons as of Tuesday.

Bets that the Fed will soon raise borrowing costs have buoyed the dollar and cut the appeal of precious metals. There’s a 74 percent chance that the central bank will increase rates at its Dec. 15-16 meeting, Fed-fund futures show.

Fed Chair Janet Yellen said Wednesday that waiting too long to end the era of near-zero interest rates could force the central bank to tighten too quickly, which would risk disrupting financial markets and the six-year expansion.

“Market participants are clearly convinced that the U.S. Federal Reserve will raise interest rates,” Commerzbank AG analysts including Daniel Briesemann said in a note. “This is doubtless putting pressure on the price and is likely to preclude any recovery in the next two weeks.”

Silver futures also fell on the Comex. On the New York Mercantile Exchange, platinum and palladium declined.

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