October 7, 2016
Gold Heads for Biggest Weekly Loss Since ‘13 as Hike Odds Surge
(Bloomberg) - Gold is on course for the biggest weekly loss in more than three years as expectations increase that the Federal Reserve is on the verge of raising U.S. interest rates, buoying the dollar and pushing bullion toward the lowest level in four months.
After an eight-day losing run, bullion for immediate delivery was little changed at $1,253 an ounce at 12:55 p.m. Singapore time, according to Bloomberg generic pricing. The metal fell 1 percent to close at $1,254.38 on Thursday, the lowest since June 7, and it is down 4.8 percent this week, the most for a week since June 2013.
Gold has tumbled as traders see increasing odds for higher U.S. borrowing costs, damping the appeal of non-interest bearing bullion. Filings for U.S. unemployment benefits fell last week to the second-lowest since 1973, data showed Thursday, spurring optimism Friday’s payrolls report will reinforce the picture of a strong labor market. A close below $1,248 opens would up a clear move to $1,200 and mark an “emotional end” to the week for bulls, according to Jeffrey Halley, a market strategist at Oanda Asia Pacific Pte.
Dollar’s Strength
“Gold is attacking significant support,” Singapore-based Halley said in an e-mail. “The general strength of the dollar continues to weigh on precious metals as the market increasingly prices in the likelihood of a Fed rate hike in December. A good non-farm payrolls number tonight -- an increase of 200,000 -- will all but confirm a December hike in the eyes of the street.”
Friday’s payrolls report is forecast to show the U.S. added about 172,000 jobs in September. This week, Fed Bank of Richmond President Jeffrey Lacker urged the central bank to raise rates. The probability of a move in December has climbed to 64 percent as of Thursday from 53 percent a week ago, according to futures data compiled by Bloomberg.
Still, a strategic buying opportunity may open up in gold should prices drop substantially below $1,250, Goldman Sachs Group Inc. said in a report received Friday. While the drop over the past month has been in line with the bank’s bearish outlook, there could be a case for purchases if the sell-off deepens, according to analysts including Jeffrey Currie and Max Layton.
In other precious metals:
Spot silver was little changed, platinum lost 0.3 percent and palladium dropped 0.7 percent.