Gold Market Becoming `Dull' as Investors Factor in Higher Rates

  • Traders see 78% chance that Fed will raise rates next week
  • Gold near 5-year low as higher borrowing costs curb its appeal

Gold’s price swings are running out of steam as investors factor in the likelihood that the Federal Reserve will raise interest rates next week.

After jumping the most since August on Dec. 4 and then sliding 0.8 percent on Monday, bullion futures gained 0.1 percent on Tuesday. The metal touched a five-year low last week on expectations that the Fed will soon raise borrowing costs, curbing demand for assets that don’t pay interest.

There’s an 78 percent chance that policy makers will raise rates at their Dec. 15-16 meeting, Fed-funds futures show and Fed Chair Janet Yellen has said the pace of increases will be gradual. Holdings in bullion-backed funds snapped the longest run of declines since March.

“A lot of the rate rise has been factored into the gold price,” David Govett, head of precious metals at Marex Spectron Group in London, said in an e-mailed note. It’s “extremely dull” for precious metals as investors await next week’s Fed meeting, he said.

Gold futures for February delivery added 0.1 percent to settle at $1,076.50 an ounce at 1:43 p.m. on the Comex in New York.

Dollar Support

Bullion is finding some support from a weaker dollar, Commerzbank said in a report. The greenback, which has advanced 7.9 percent against a basket of 10 currencies this year, lost as much as 0.9 percent on Wednesday.

Holdings in gold-backed exchange-traded products rose 0.2 metric ton to 1,465.4 tons as of Tuesday, data compiled by Bloomberg show. That was the first increase since Nov. 17 and up from the lowest in more than six years.

Silver futures for March delivery gained 0.5 percent to $14.189 an ounce on the Comex. On the New York Mercantile Exchange, platinum and palladium rose.

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