Gold Declines as Investors Zero In on Outlook for Inflation
(Bloomberg) -- Gold dropped as investors weighed the outlook for inflation in the U.S. for clues on the likely pace of interest rate increases by the the Federal Reserve in 2016.
Bullion for immediate delivery lost as much as 0.4 percent to $1,071.72 an ounce and was at $1,073.77 at 11:50 a.m. in Singapore, according to Bloomberg generic pricing. The metal
gained 0.9 percent last week as the dollar fell.
Gold has retreated 9.3 percent this year as the U.S.
economy improved, which prompted the Fed to tighten monetary policy in December for the first time in almost a decade. U.S.
central bankers have said that they will proceed gradually with additional moves next year. While a pickup in the pace of price gains may spur demand for gold as a hedge, rising inflation may induce higher rates, which typically hurt bullion.
“The market will be watching U.S. inflation data closely,”Huatai Great Wall Futures said in a note on Monday. A rise in inflation expectations will bolster the case for further Fed
rate rises, impacting precious metals, the brokerage said.
The U.S. central bank’s preferred inflation index was at 0.4 percent in November, a report showed on Wednesday. It has been below the Fed’s 2 percent target for more than three years
as commodities including oil tumbled.
Holdings in global exchange-traded funds backed by bullion touched a six-year low of 1,458.19 metric tons on Dec. 17.
Assets were at 1,470.29 tons on Dec. 23, data compiled by Bloomberg show.
In other metals markets, spot silver fell 0.7 percent to $14.2675 an ounce, while platinum rose 0.2 percent and palladium gained 0.1 percent.