Gold Investors Sell From ETPs at Fastest Pace in Three Months

Updated on
  • Assets in bullion funds drop on outlook for U.S. rate rise
  • Gold futures in New York fell for three straight weeks

Gold Holds Near Three-Month Low

Gold investors are selling from bullion-backed funds at the fastest pace in three months as speculation that the Federal Reserve will lift U.S. interest rates next month cut demand for the metal as a store of value.

Holdings in exchange-traded products fell 26.9 metric tons last week, the most since July. Gold futures in New York tumbled 4.7 percent last week, a third straight loss, after a government report Friday showed accelerating growth for U.S. jobs. Gains for the labor market make bullion less appealing as a haven asset and increase the chances that Fed officials will start tightening monetary policy. The metal traded little changed on Monday.

There’s a 68 percent probability the U.S. central bank will raise rates at its December meeting, up from 56 percent the day before the jobs report, Fed-fund futures data show. Higher borrowing costs curb bullion’s appeal because it doesn’t pay interest or pay dividends like other assets such as bonds or equities. Gold is down about 8 percent this year, set for a third straight annual loss.

“The door is wide open for a first rate hike by the U.S. Federal Reserve in December,” Commerzbank AG analysts said in a report. “The U.S. economy appears to be coping well.”

Gold futures for delivery in December added less than 0.1 percent to settle at $1,088.10 an ounce at 1:52 pm. on the Comex in New York. Silver futures declined on the Comex, as platinum and palladium fell on the New York Mercantile Exchange.

The 271,000 gain in U.S. payrolls for October was the biggest this year and exceeded all estimates in a Bloomberg survey. Fed Chair Janet Yellen last week said improvements in the U.S. economy meant a rate increase next month was a “live possibility.”

Investors sold gold through ETPs for a sixth day Friday, cutting holdings by 3.1 tons to 1,512.8 tons, data compiled by Bloomberg show. Assets are at the lowest since Aug. 19.

“Money has been flowing out of gold,” Xu Wenyu, a Shanghai-based analyst at Huatai Great Wall Futures Co., said by phone. “We may see occasional spurts of buying, but gold remains on a downtrend.”

— With assistance by Luzi-Ann Javier

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