Gold Futures Hold Near Three-Month Low on December Fed-Rate Bets

  • Futures markets show a 66% chance the Fed will move in Dec.
  • Gold reached three-month low on Tuesday on Fed rate bets

Gold held near a three-month low on growing expectations that the Federal Reserve will increase interest rates in December.

Odds that the central bank will raise rates next month have climbed to 66 percent, from 39 percent a month ago, according to Fed-fund futures data. A gauge of the dollar rose on Tuesday to the highest since at least 2005, curbing the appeal of bullion as an alternative asset.

Gold posted the biggest weekly drop in a year on Friday after a report showing U.S. payrolls surged in October, boosting the case for the Fed to raise rates. Chicago Fed President Charles Evans said on Tuesday he’d like the central bank to get back to a point where the federal funds rate is “trading comfortably at its neutral rate well above zero.”

“The key driver for the gold market at the moment is clearly the dollar and ongoing reaction to what now appears to be a very likely interest rate increase by the U.S. Fed in December,” said Ric Spooner, a chief analyst at CMC Markets in Sydney.

Gold futures for December delivery lost 0.3 percent to settle at $1,084.90 an ounce at 1:46 p.m. on the Comex in New York. The metal fell to $1,084 on Tuesday, the lowest since Aug. 7.

China’s industrial production report on Wednesday showed weaker-than-expected growth in October, while retail sales accelerated, underscoring a shift in the economy toward greater reliance on consumer spending. China vies with India as the world’s largest gold buyer.

“The market is a little bit concerned about the data we’ve seen so far from China this month,” Spooner said.

Assets in exchange-traded products backed by gold fell on Tuesday to 1,508.57 metric tons, the lowest level since Aug. 11, when holdings were at a six-year low.

“Ongoing exchange-traded funds outflows are currently preventing any price recovery,” Commerzbank AG analysts said in a report.

Silver futures also fell on the Comex. On the New York Mercantile Exchange, palladium dropped to a two-month low, and platinum slid to the lowest since 2008.

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