August 30, 2016
Gold Heads for Monthly Drop as Investors Weigh U.S. Rate Outlook
(Bloomberg) - Gold is headed for the first monthly decline since May on rising speculation that the Federal Reserve may tighten monetary policy before the end of the year.
Bullion for immediate delivery traded little-changed at $1,323.66 an ounce at 11:25 a.m. in Singapore, according to Bloomberg generic pricing. The metal dropped to $1,314.99 on Monday, the lowest level since July 26, and it’s down 2 percent this month.
Gold’s rally this year has been eroded by prospects for higher U.S. borrowing costs, damping demand for non-interest bearing bullion while buoying the dollar. Fed Chair Janet Yellen said on Aug. 26 the case for tightening had strengthened and her deputy, Stanley Fischer, said an increase next month is possible. Fed funds futures indicate a 61 percent chance of a move in December from a low of 8 percent in June.
“Even though it’s falling because of what happened during Yellen’s speech just last week, as well as the increased probability for the rate hike, all in all, safe-haven demand for gold should persist,” Barnabas Gan, an economist at Oversea-Chinese Banking Corp., said in a Bloomberg TV interview.
While the Singapore-based bank sees a single 25-basis-point increase in December, gold will be supported by several “wild cards,” such as the U.S. presidential election and the potential triggering of Article 50, which begins a two-year countdown to Britain’s departure from the European Union, according to Gan.
Holdings in bullion-backed exchange traded funds added 0.4 metric ton to 2,032.6 tons on Monday, data compiled by Bloomberg show.
In China, bullion of 99.99 percent purity rose 0.5 percent to 284.80 yuan a gram ($1,326.55 an ounce) on the Shanghai Gold Exchange.
On the Shanghai Futures Exchange, gold for December delivery advanced 0.5 percent to 285.20 yuan a gram, while silver rose 0.2 percent to 4,176 yuan a kilogram.
Spot silver lost 0.6 percent to $18.77 an ounce, and is heading for a 7.7 percent monthly decline.
Platinum fell 6.3 percent in August and palladium retreated 2 percent.