Gold Holds Near 5-Year Low as Bets Climb on December Rate Rise

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Gold futures traded near the lowest since 2010 as investors prepared for the possibility that the Federal Reserve will increase U.S. interest rates next month, reducing the metal’s appeal as a store of value.

Prices are trapped in their worst rout since July as the outlook for higher rates diminishes the appeal of the metal against competing assets that pay interest. San Francisco Fed President John Williams said this weekend that there is a “strong case” for a rate increase in December if U.S. data hold up. The dollar reached a seven-month high against the euro, cutting demand for alternatives.

Gold fell the past five weeks and hedge funds are betting the decline is far from over. Assets in exchange-traded products backed by the metal have fallen to the lowest since 2009. Money managers are holding a net-short position in gold for first time since August as their long wagers shrunk to the smallest in seven years.

“Gold definitely will be kept in check until we see the first interest rate hike by the Fed,” Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt, said in a telephone interview. “Our view is this will take place in December.”

Gold futures for February delivery fell 0.9 percent to settle at $1,066.60 an ounce at 1:44 p.m. on the Comex in New York. Prices touched a five-year low of $1,062 on Nov. 18.

Silver futures for March delivery slid 0.5 percent to $14.061 an ounce on the Comex. On the New York Mercantile Exchange, platinum futures for January delivery dropped 1 percent to $847.40 an ounce, while palladium futures for December delivery fell 3.1 percent to $541.35 an ounce.