Gold Gains on Weaker Dollar as Investors Brace for Fed Decision
(Bloomberg) -- Gold gained from a one-week low as the dollar weakened before the Federal Reserve decides whether to raise interest rates. Platinum and palladium advanced after European car sales rose.
Bullion tends to move inversely to the U.S. currency, which has rallied this year on the prospect of the first U.S. rate increase in almost a decade. A gauge of the dollar declined on Tuesday on speculation this year’s gain will leave it vulnerable to a short-term selloff.
Gold touched a five-year low earlier this month and silver is near the lowest in six years on expectations of higher borrowing costs, which curb the appeal of precious metals because they don’t pay interest. Trades are pricing in 78 percent odds that the Fed will raise rates after ending its meeting Wednesday. While liftoff then is widely priced in, gold will still retreat over the coming year as rates continue to rise, Societe Generale SA said.
“The key driver is the Fed,” Robin Bhar, an analyst at Societe Generale in London, said by phone. “There is no inflation, there is no investor appetite. Every time the Fed has a tightening cycle upwards, it will keep the pressure on gold.”
Gold for immediate delivery gained 0.6 percent to $1,066.38 an ounce by 10:50 a.m. in London, according to Bloomberg generic pricing. Prices, which are set for a third straight annual decline, touched the lowest since Dec. 4 on Monday.
Silver gained 0.8 percent to $13.7795 an ounce, after slumping to $13.6482 on Monday, the lowest since August 2009. Investors have been dumping holdings in exchange-traded products backed by gold. Assets fell to 1,464.2 metric tons on Monday, the lowest since February 2009, data compiled by Bloomberg show. They’ve sold metal in 15 of the last 18 days.
Platinum climbed 1.1 percent to $857.29 an ounce and palladium advanced 1.4 percent to $555 an ounce. The metals are mostly used in catalytic converters that curb vehicle emissions. Data from the European Automobile Manufacturers’ Association showed car sales in the region increased 14 percent in November.
“This suggests robust demand for platinum and palladium, especially since more new cars should be registered in the EU next year too," Daniel Briesemann, an analyst at Commerzbank AG, said in an e-mailed note. "This should lend support to both prices."