Gold Sags as Signs of Buoyant U.S. Growth Give Pause to Fed Bets

  • Investors' holdings in ETPs increase by the most since January
  • Silver futures, palladium also decline as platinum advances

Gold fell from the highest in more than three months as signs of a resilient U.S. economy prompted some investors to rethink their expectations that the Federal Reserve will put off raising interest rates until well into next year.

U.S. consumer sentiment rose more than forecast this month, according to a private report Friday, a day after government data showed jobless claims unexpectedly slid to match the fewest in four decades. Fed Bank of New York President William C. Dudley said Thursday he favors the increase in rates later this year, if the economy performs in line with his forecast.

Gold reached the highest since June on Thursday as mounting concern over the outlook for global growth fueled bets that the U.S. central bank would delay tightening monetary policy. Higher rates curb the appeal of bullion because it doesn’t pay interest, unlike competing assets. Fed-fund futures show a 32 percent chance of a rate increase in December, up from 27 percent on Wednesday.

“Any positive economic report is reinforcing the chance of the Fed the raising rates,” Fain Shaffer, the president of Infinity Trading Corp. in Indianapolis, said in a telephone interview. “I just don’t see them doing it by the end of the year, but anything can happen.”

Gold futures for December delivery slipped 0.4 percent to $1,183.10 an ounce at 1:42 p.m. on the Comex in New York, after touching $1,191.70 on Thursday, the highest for a most-active contract since June 22.

The metal advanced 2.4 this week as investors returned to exchange-traded funds backed by gold. Holdings in physically backed ETPs increased 0.9 percent this week through Thursday, set for the biggest gain since January, to 1,542.7 metric tons, data compiled by Bloomberg show.

Silver futures also fell on the Comex. On the New York Mercantile Exchange, palladium futures slipped, while platinum futures gained.

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