Gold Touches One-Month Low as Fed Rate Speculation Mounts

  • Three Fed officials have appearances scheduled for Wednesday
  • Investors sell holdings in gold-backed exchange-traded funds

Gold Hovers at One-Month Lows

Gold touched a one-month low after Federal Reserve Chair Janet Yellen told a congressional hearing that a move on interest rates in December is a “live possibility” if economic data hold up.

While no decision on rates have been made, policy makers expect the economy will continue to grow at a pace that justifies gradual tightening in monetary policy, Yellen said at a hearing of the House Financial Services Committee on Wednesday. Investors boosted the odds of a December rate increase to 60 percent, 10 percentage points higher than Tuesday. Higher rates curb gold’s appeal because it doesn’t pay interest.

Bullion fell in the past five quarters as a strengthening economy raised concern that the Fed would tighten policy. Last week, the Federal Open Market Committee signaled the economy may be strong enough to raise rates. Reports Wednesday showed U.S. service producers unexpectedly expanded in October at the second-fastest pace in a decade, while companies added more workers.

“With only six weeks to go, the focus will be very much on incoming U.S. data in order to decipher what the FOMC intend to do on Dec. 16,” Ole Hansen, an analyst at Saxo Bank A/S in Copenhagen, said by e-mail. “I could see the market movements slow down as traders now look for further guidance.”

Gold futures for December delivery dropped 0.7 percent to settle at $1,106.20 an ounce at 1:41 p.m. on the Comex in New York, after touching $1,105.60, the lowest since Oct. 2.

New Jobs

U.S. companies added 182,000 workers in October, signaling steady improvement in the job market, according to a private payroll report. A government report Friday is expected to show the economy added 182,000, according to a Bloomberg survey of economists. The unemployment rate is projected to hold at 5 percent.

Holdings in exchange-traded funds slid by the most in two months, dropping 0.4 percent to 1,530.7 metric tons, according to data compiled by Bloomberg.

Silver futures for December delivery lost 1.2 percent to $15.058 an ounce on the Comex. On the New York Mercantile Exchange, palladium futures for December delivery slid 3.2 percent to $623.40 an ounce for a third straight decline, the longest stretch in more than two months. Platinum futures for January delivery fell 0.8 percent to $954.80 an ounce.

Glencore Plc sold a share of its future silver output in a deal that includes a $900 million upfront payment, as the trading and mining company works to cut its $30 billion debt pile.

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