Gold Sags in Longest Slump Since June as Demand Ebbs on Dollar

  • Odds of U.S. rate hike this year at 57%, Fed fund futures show
  • DOllar spot index heads for biggest gain in more than 2 weeks

Gold fell for a fifth straight session, the longest slump since June, as a rising dollar eroded demand for the metal as an alternative asset. 

The Bloomberg Dollar Spot Index rose 0.7 percent, heading for the biggest gain in more than two weeks. Currencies of natural-resource-exporting nations fell as commodities prices dropped and investors’ appetite for riskier assets waned. Bullion futures erased an earlier gain as the greenback advanced.

After a first-half surge, gold prices have largely stalled as concerns that the Federal Reserve will raise U.S. interest rates buttress the dollar and reduce demand for the metal as a store of value. Traders put odds of a Fed rate hike by year-end at 57 percent, up from 12 percent at the start of July.

“You have rising expectations that there is the possibility of a rate increase this year,” Mike Dragosits, a senior commodity strategist at TD Securities in Toronto, said in a telephone interview. “A December rate hike is a distinct possibility that’s hurting the gold market.”

Gold futures for December delivery fell 0.1 percent to settle at $1,323.70 an ounce at 1:44 p.m. on the Comex in New York. The losing streak is the longest since June 23.

Precious-metals traders have been in thrall to contrasting comments from Fed officials before the Fed’s policy meeting next week. Boston Fed President Eric Rosengren said Friday that the economy may overheat if the bank waits too long.

In other metals

  • Silver futures for December delivery dropped 0.1 percent to $18.975 an ounce on the Comex.
  • Holdings in gold-backed exchange traded funds added 0.6 metric ton to 2,020.3 tons on Monday, data compiled by Bloomberg show.
  • On the New York Mercantile Exchange, platinum and palladium fell.
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