Gold ETP Sales in Longest Run Since March as Rate Increase Looms

  • Gold-backed fund holdings at lowest in more than six years
  • Bets have increased that Fed will raise rates next week

Gold sales from bullion-backed funds stretched into the longest run in eight months as bets that the Federal Reserve will raise interest rates next week cut the appeal of owning the metal.

Holdings in exchange-traded products fell for a 13th day, remaining at the lowest since February 2009, data compiled by Bloomberg show. Atlanta Fed President Dennis Lockhart said Monday that conditions are very satisfactory for a rate increase, which cuts the appeal of gold because it doesn’t pay interest or give returns like some other assets.

Gold is set for a third annual decline and touched the lowest in five years last week on expectations U.S. policy makers will soon raise borrowing costs for the first time in almost a decade. There’s a 78 percent probability that the central bank will increase rates at their Dec. 15-16 meeting, Fed-funds futures show.

"We think we’re almost there now as regards to the Fed rate hike," Matthew Turner, an analyst at Macquarie Group Ltd. in London, said by phone. "It’s an overwhelming consensus. People are looking beyond the Fed now and wondering what’s going to happen next year."

Gold Price

Gold futures for February delivery gained less than 0.1 percent to settle at $1,075.30 an ounce at 1:40 p.m. on the Comex in New York. Prices declined 0.8 percent on Monday.

Assets in gold-backed ETPs declined 4 metric tons to 1,465.2 tons as of Monday, data compiled by Bloomberg show. The drop is the longest run since March.

Oil near the lowest price in more than six years is also curbing demand for gold as a hedge against faster inflation, Vyanne Lai, an economist at National Australia Bank Ltd. in Melbourne, said by e-mail. The fuel has slipped on speculation that the Organization of Petroleum Exporting Countries, which effectively dropped formal output targets last week, will pump more crude into an oversupplied market.

Silver futures slid 1.5 percent to $14.116 an ounce on the Comex. On the New York Mercantile Exchange, platinum futures for January delivery fell 1.9 percent to $846.50 an ounce, and palladium futures for March delivery dropped 1.4 percent to $547.90.

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