Gold Hits 1-Week Low as U.S. Resilience Boosts Equities, Dollar

  • Bullion rally slowing after capping best first half in decades
  • Traders pricing in rising odds of a year-end Fed rate increase

Gold fell to the lowest in more than a week as signs of U.S. economic resilience boosted world equities and the dollar, reducing demand for precious metals as a haven.

The MSCI All-Country World Index touched the highest in almost a year after data released Friday showed U.S. employment jumped in July and wages climbed. Traders are now pricing in a 48 percent chance of an interest rate increase by December, up from 36 percent a week earlier.

Gold’s rally is slowing this quarter after capping its best first half in almost four decades. The surge that has pushed prices up 27 percent this year was fueled by pledges from central banks in Europe and Japan to continue to crank up stimulus, while rates remained low in the U.S. Rising borrowing costs hurt the investment appeal of gold and other precious metals because they don’t offer yields or dividends.

“We suspect the group will likely remain under pressure over the short term, given the backdrop of firmer equities and a rising dollar,” Edward Meir, an analyst at INTL FCStone in New York, said in a note, referring to precious metals.

Gold futures for December delivery slipped 0.2 percent to settle at $1,341.30 an ounce at 1:41 p.m. on the Comex in New York, after trading at $1,335.30, the lowest intraday since July 29.

China, the world’s biggest producer and consumer of gold, slowed bullion purchases in July as prices soared to the highest level since 2014 after the U.K. voted to leave the European Union.

In other precious metals news:

  • Holdings in gold-backed exchange-traded funds added 8.32 metric tons to 2,039.5 tons on Friday, data compiled by Bloomberg show. That’s the highest level since July 2013 and the eighth straight gain.
  • Silver futures also slipped on the Comex. On the New York Mercantile Exchange, palladium declined while platinum rose.
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