Gold Trades Near Four-Month Low After Fed Meeting Minutes

  • Traders see a 67% chance of U.S. rate increase by December
  • Platinum futures touch six-month low, fall into a bear market

Spot gold traded near a four-month low as minutes of the Federal Reserve’s latest meeting showed the decision to hold U.S. interest rates steady was a close call, with several officials saying a rate hike was needed “relatively soon.”

“Several members judged that it would be appropriate to increase the target range for the federal funds rate relatively soon if economic developments unfolded about as the committee expected,” the minutes from the Sept. 20-21 gathering in Washington showed. Lower rates boost the competitiveness of bullion against interest-bearing assets such as bonds.

Gold’s 25 percent first-half rally has fizzled out as speculation increased that the Fed will raise borrowing costs by year-end, strengthening the dollar and curbing the appeal of the metal as a store of value. The odds of a rate increase by December have climbed to 67 percent from about 59 percent at the end of last month.

“With the Fed minutes, a lot is going to ride on that,” Tim Evans, the chief market strategist at Long Leaf Trading Group Inc. in Chicago, said in a telephone interview. There has been “all that pressure on gold” from Fed rate expectations.

Gold for immediate delivery rose 0.2 percent to $1,255.77 an ounce at 2:26 p.m. in New York. The metal touched $1,241.51 on Friday, the lowest since June. Before the Fed meeting minutes were released, gold futures for December delivery slid 0.2 percent to settle at $1,253.80 an ounce on the Comex in New York.

Buying Opportunity?

ABN Amro Bank NV today lowered its year-end forecast by 9.4 percent to $1,200 and said this year’s uptrend is over. Rising inflation and sagging confidence in the ability of central banks to revive global growth will drive up gold, making sense for investors to hold the metal, according to Ronald Stoeferle, managing partner at Incrementum AG.

In other precious metals news:

  • Global holdings in bullion-backed exchange-traded funds fell 0.3 metric ton to 2,046.1 tons, data compiled by Bloomberg show.
  • Silver futures dropped less than 0.1 percent to $17.505 an ounce on the Comex.
  • Platinum futures for January delivery fell 0.8 percent to settle at $941.90 an ounce on the New York Mercantile Exchange. The drop marks a more-than 20 percent decrease from a recent closing high in August, meeting the common definition of a bear market.

— With assistance by Ranjeetha Pakiam

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