Gold Slips as Investors Weigh Conflicting Views of U.S. Economy

  • Consumer confidence gauge in October falls to lowest in a year
  • Probability of an interest-rate increase up from a month ago

Gold declined for a third day this week as investors weighed the likelihood of higher U.S. interest rates after a consumer confidence gauge unexpectedly dropped.

Bullion has slumped this month against the backdrop of a firmer dollar and a drumbeat of commentary from Federal Reserve officials that higher U.S. borrowing costs are needed. On Friday, futures pared declines after a survey showed consumer confidence unexpectedly fell to a one-year low in October as Americans soured on the outlook for the economy amid a contentious presidential campaign. 

“There’s uncertainty on the part of investors who don’t really know what the Fed is going to do in terms of hiking rates in December,” Mike Dragosits, a senior commodity strategist at TD Securities in Toronto, said by telephone. “But the more data that comes in a bit more mixed or on the slightly weaker side, the more investors struggle with the idea the Fed hikes in December, and that shifts gold around.”

Gold futures for December delivery slid 0.2 percent to settle at $1,255.50 an ounce at 1:39 p.m. on the Comex in New York, after earlier gaining as much as 0.2 percent. Bullion for immediate delivery was little changed.

Fed Funds

The probability that the Fed will raise rates before the end of this year rose to 65 percent, up from 52 percent a month ago. Higher rates reduce the appeal of gold, which doesn’t pay interest like assets such as bonds or equities, while economic concerns boost the metal’s appeal as a haven.

Meanwhile, holdings in exchange-traded funds increased to the highest since 2013. Assets in gold-backed ETFs rose 1.94 metric tons to 2,050.3 tons as of Thursday, data compiled by Bloomberg show. This year, the holdings have surged 40 percent, with most of the increase coming in the first half.

In other precious metals:

  • Silver futures for December delivery slid 0.1 percent to $17.441 an ounce on the Comex.
  • On the New York Mercantile Exchange, platinum and palladium climbed.
  • Mining companies, refiners and traders in the gold market are gathering next week in Singapore for the London Bullion Market Association’s annual conference.

— With assistance by Luzi-Ann Javier, Ranjeetha Pakiam, and Thomas Biesheuvel

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