Gold Drops as Rate Outlook Lifts Dollar to Highest Since March.
(Bloomberg) - Gold fell as the dollar traded at the highest level in more than seven months on the outlook for rising U.S. interest rates, and data showed that money managers and exchange-traded fund investors cut bullish bets.
Bullion for immediate delivery was 0.2 percent lower at $1,263.45 an ounce at 11:52 a.m. in Singapore, according to Bloomberg generic pricing. While the metal rose 1.2 percent last week, it is still headed for a monthly loss.
Gold’s advance in 2016 has been eroded this half on prospects for higher borrowing costs from the Federal Reserve, with Fed Bank of San Francisco President John Williams saying on Friday he’d support one increase in 2016 and a few more next year. The Bloomberg Dollar Spot Index rose for a third day on Monday to the highest level since mid-March. Among data due this week, are figures on new-home sales as well as economic growth.
“Market participants will be watching for any data that could drive the FOMC to raise rates,” Jason Schenker, president if Prestige Economics LLC, said in a note received on Monday, referring to the policy-setting Federal Open Market Committee by its initials. “Near-term Fed-hawkish, dollar-bullish factors threaten to send gold prices lower.”
Some investors are stepping back. The net-long position in bullion futures and options fell for a third week to the smallest in more than seven months, for the week to Oct. 18, according to Commodity Futures Trading Commission data released Friday. Holdings in exchange-traded funds dropped 17.7 metric tons as of Friday, the most in tonnage terms since July 2013, to 2,041.9 tons.
The FOMC’s next meeting is on Nov. 1-2, the week before the U.S. presidential election, and policy makers gather again in mid-December for the final scheduled session of 2016, when Fed funds futures show a 68 percent chance of a hike. That’s up from 59 percent odds at the start of October.
Gold is set to advance as much as 15 percent before the end of next year as the U.S. central bank goes slow on increasing interest rates and the dollar remains subdued, Mark Mobius, executive chairman at Templeton Emerging Markets Group, said in an interview.
Strength in the dollar may give the Fed a reason not to raise in December, and instead introduce another round of quantitative easing next year, Marc Faber, publisher of the Gloom, Boom & Doom report, told Bloomberg in an interview, adding that he likes gold miners and ownership of precious
* In China, bullion of 99.99 percent purity added 0.2 percent to
276.05 yuan a gram ($1,267.51 an ounce) on the Shanghai Gold
* On the Shanghai Futures Exchange, gold for December delivery
increased 0.1 percent to 276.65 yuan a gram, while silver rose
0.1 percent to 4,005 yuan a kilogram.
* On global markets, spot silver lost 0.2 percent, platinum
gained 0.2 percent and palladium climbed 0.6 percent.