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Gold eyes fourth weekly loss as investors count on Fed rate rise

Rising rates weigh on gold, as they lift the opportunity cost of holding non-yielding assets, while boosting the dollar

Published: Updated:

Gold slid towards a fourth straight weekly loss on Friday, as investors shied away from the metal on expectations that Federal Reserve is set to raise U.S. interest rates next month for the first time in nearly a decade.

A raft of Fed officials lined up behind a December rate rise on Thursday with one central banker saying the risk of waiting too long was now roughly in balance with the risk of moving too soon to normalize rates after seven years near zero.

Spot gold was down 0.1 percent at $1,083.30 an ounce at 1030 GMT, while U.S. gold futures for December delivery were up $1.90 an ounce at $1,082.90.

Rising rates weigh on gold, as they lift the opportunity cost of holding non-yielding assets, while boosting the dollar. Gold has fallen more than 5 percent since the start of November, when a stronger than expected U.S. payrolls report fuelled expectations for a near-term rate hike.

“The fantastic jobs report was really putting pressure on gold, because it now looks like a December rate hike is almost set in stone,” ING commodity strategist Hamza Khan.

Gauging strength

Traders will be eyeing U.S. data due later in the day, including retail sales, to gauge the strength of the economy.

Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Shares, fell by another 1.5 ton on Thursday. The fund has seen outflows of more than 30 tonn this month, the first monthly decline in its holdings since July.

The platinum group metals also came under pressure from fund selling. Holdings of platinum ETFs are at a two-year low, while assets of palladium funds are at their lowest since April 2014.

“This additional near-term supply from ETFs and other liquidation took platinum to seven-year lows and undermined palladium also,” HSBC said in a note.

“While we find physical demand for the PGMs from industrial sources to be broadly steady, investors are retreating and we see no early signs of further production restraint.”

Platinum was at $873.75 an ounce, little changed from the previous session, having earlier tumbled to its lowest since Feb. 2010 at $865.25.

Palladium was down 1.5 percent at $550 an ounce after touching a 2-1/2 month low of $530.75. Prices of the autocatalyst metal are down more than 10 percent this week, its biggest weekly decline since late 2011.

Silver was up 0.1 percent at $14.29 an ounce.