Money News

Gold eases as dollar jumps to fresh near nine-month high

NEW YORK/LONDON (Reuters) - Gold prices slipped on Monday as the dollar strengthened to a fresh near nine-month high on growing speculation that the U.S. Federal Reserve would hike interest rates in December.

Gold bullion is displayed at Hatton Garden Metals precious metal dealers in London, Britain July 21, 2015. REUTERS/Neil Hall/Files

Recent positive economic data and comments from central bank officials have bolstered expectations of a rate hike, with traders on Monday seeing a nearly 70 percent chance that the Fed would tighten credit in December, according to data from CME Group’s FedWatch programme.

The U.S. currency strengthened about 0.1 percent against a currency basket .DXY, also lifted by the receding chance of Donald Trump becoming U.S. president.

Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

Spot gold XAU= was down 0.2 percent at $1,263.96 an ounce by 3:27 p.m. EDT (1340 GMT), while U.S. gold futures GCv1 for December delivery settled down 0.3 percent at $1,263.70.

However, improving physical demand from major Asian consumers and lingering uncertainty around the Nov. 8 U.S. election could lend support in coming weeks, analysts said.

“We are buying gold and recommending that clients buy gold because the uncertainty is not going to get less; it’s going to get more,” said Jeffrey Sica, president and chief investment officer of Sica Wealth Management.

“With whoever gets elected president, there’s just so many things that have to work themselves out.”

Gold, regarded as a safe haven, typically rises with increased volatility and fear in global markets.

Seasonal demand from the Indian festival season, when gold is traditionally given as a gift, is also expected to help support prices.

“Physical demand is going to be astronomical and as far as the seasonal demand we see in India - that just seems to be increasing each and every year,” Sica said.

Third-quarter U.S. growth figures and Fed policymakers’ speeches due this week will be closely watched for clues on a possible interest rate hike.

Investment interest in gold showed signs of softening last week. U.S. Commodity Futures Trading Commission data on Friday showed hedge funds and money managers cut their net long positions in COMEX gold for a third week in the week to Oct. 18.

The world's largest gold-backed exchange-traded fund, SPDR Gold Shares GLD, reported its biggest one-day outflow since April 2013 on Friday, of 16.6 tonnes.

Silver XAG= was up 0.3 percent at $17.53 an ounce. Platinum XPT= was 0.5 percent higher at $933.8 an ounce after falling on Friday to $921.20, the lowest since Feb. 29.

Palladium XPD=, which hit a more than three-month low of $613.10 on Friday, was up 1.1 percent at $630.85.

Additional reporting by Apeksha Nair and Nallur Sethuraman in Bengaluru; Editing by David Evans and Richard Chang