September 29, 2015
Gold Holds Biggest Decline in a Month as Fed Rate Increase Looms
(Bloomberg)- Gold held the biggest drop in a month on expectations the Federal Reserve will raise U.S. interest rates before the year is over, countering demand for a haven amid a global markets slump. Platinum extended its decline to the lowest in more than six years.
Bullion for immediate delivery traded at $1,132.05 an ounce at 12:03 p.m. in Singapore from $1,131.95 on Monday, when it dropped 1.2 percent, the most since Aug. 26, according to Bloomberg generic pricing. Prices are heading for a fifth quarterly decline, the worst run since 1997.
The Fed will probably increase interest rates later this year and tighten policy gradually thereafter, New York Fed President William C. Dudley said Monday, echoing the sentiment of Chair Janet Yellen that an uncertain global outlook won’t postpone liftoff into 2016. Gold fell on Monday even as selling deepened in global equities and commodities markets.
“Gold is no longer exactly a safe haven,” Bernard Aw, a strategist at IG Asia Pte in Singapore, said in an interview on Tuesday. “Yesterday we didn’t really see a big jump in risk aversion despite all the selloff in U.S., European equity markets.”
Asian stocks tumbled toward an almost three-year low on Tuesday, the cost of insuring debt in the region surged and the yen advanced as a selloff in commodity-trading firms spooked investors.
Fed-fund futures data conflict with Yellen’s assessment, showing traders see a 41 percent chance the Fed will raise rates by the year-end, down from a 64 percent probability Sept. 16, the day before the Fed announced its decision. Odds climb to 48 percent by January, according to data compiled by Bloomberg.
“The message from the Fed is very consistent -- they want to see a rate hike this year if the current economic conditions continue to sustain at the current pace of improvement,” Aw said. “But for gold, a lot of it is because of the commodities space, the selloff, so that in a way affects gold price.”
Silver for immediate delivery was little changed at $14.6022 an ounce after a 3.4 percent slump on Monday, the most since Aug. 26. Platinum slid as much as 0.8 percent to $911.54 an ounce, the lowest since January 2009, before trading at $913.65.