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PRECIOUS-Gold slides as market looks to Fed rate rise
November 29, 2016 / 11:35 AM / 10 months ago

PRECIOUS-Gold slides as market looks to Fed rate rise

* Investors favor risk assets such as equities
    * Rising yields make U.S. Treasuries more attractive

 (Updates prices; adds comment, byline, datelines)
    By Marcy Nicholson and Pratima Desai
    NEW YORK/LONDON, Nov 29 (Reuters) - Gold prices fell on
Tuesday due to expectations of rising U.S. interest rates and
improving sentiment for global economic growth, which mean
investors are likely to favor risk assets such as equities.
    Bullion prices came off their lows as the U.S. dollar 
turned negative against a basket of six major currencies.
    Spot gold was down 0.4 percent at $1,188.30 an ounce
by 2:22 p.m. EST (1922 GMT), from a session low at $1,180.85.
U.S. gold futures settled down 0.2 percent at $1,187.90.
    The U.S. Federal Reserve is widely expected to raise rates
in December, which could boost the U.S. currency, making
commodities more expensive for non-U.S. buyers. 
    The dollar hit an almost 14-year peak last week.
    "Gold is struggling here with the higher dollar and better
sentiment for growth," said Danske Bank analyst Jens Pederson.
    "Rising bond yields means it's cheaper to buy U.S.
Treasuries, which, like gold, are viewed as a risk-free asset."
    However, government bonds, unlike gold, earn interest. 
    Expectations of stronger growth after U.S President-elect
Donald Trump takes office in January have also helped equity
markets since the election earlier this month.
    "After the election people are thinking we're going to get a
few more years of growth and stronger equities," said Andrew
Cole, a fund manager at Pictet Asset Management. "Gold's losses
are not surprising given the dollar."
    Analysts said doubts about whether Italian Prime Minister
Matteo Renzi will win a referendum on Sunday on constitutional
reform have not, as some had expected, countered negative
sentiment toward gold.
    But the Italian vote and Austria's presidential election
also on Sunday cannot be ignored. 
    On the technical front, traders say a break of a Fibonacci
support level at $1,171.76 last week means gold could see lower
levels over coming weeks.
    Spot palladium rose by as much as 1.4 percent to
$766.20 an ounce, the highest since June 2015. It was on track
to close November up 23 percent, the biggest monthly gain since
February 2008.
    "The white metal is likely to retain near-term support and
hence we raise our short-term trading range to $650-$810 an
ounce from $575-$720/oz previously," said UBS Wealth Management
Research in a note.
    "Mine supply is forecast to be flat this year and next,
while demand in autocatalysts should expand at a solid pace,
likely making 2017 the sixth consecutive deficit year."
    Silver up 0.12 percent at $16.65 an ounce, while
platinum lost 0.7 percent at $916.60.
    

 (Additional reporting by Apeksha Nair and Nallur Sethuraman in
Bengaluru; editing by Louise Heavens and Tom Brown)

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