December 1, 2016 / 10:40 AM / a year ago

PRECIOUS-Gold hits 10-month low after biggest monthly drop in 3 years

* Gold slid 8 pct in Nov as bond yields, dollar surged
    * No1 gold ETF saw biggest monthly outflow since 2013
    * Bond yields still rising in Europe after oil rally
    * GRAPHIC-2016 asset returns:

 (Updates prices)
    By Jan Harvey
    Dec 1 (Reuters) - Gold fell to its lowest since February on
Thursday, extending losses after its biggest monthly decline in
more than three years, as a surge in oil prices boosted bond
yields, denting interest in non-yielding gold as an alternative
    The precious metal fell more than 8 percent in November,
hurt by a jump in the dollar and Treasury yields, and by
expectations that the Federal Reserve is gearing up to lift
interest rates for only the second time in a decade this month.
    That led to hefty outflows from gold-backed exchange-traded
funds, the largest of which, New York-listed SPDR Gold Shares
, said its holdings fell nearly 60 tonnes in November, the
most of any month since May 2013. 
    Spot gold was down 0.3 percent at $1,169.77 an ounce
at 1230 GMT, off an earlier 10-month low of $1,163.45. U.S. gold
futures for February delivery were down $2.50 an ounce at
    "The key story for gold is still the combination of a
stronger dollar and rising Treasury yields," Julius Baer analyst
Carsten Menke said. "Either of the two is not really helping
gold at the moment." 
    "We've seen outflows of around 5 million ounces (from ETFs)
since the U.S. election, and these are mainly from the
U.S.-listed products," he said. "There is a real rotation away
from safe-haven investments, and towards pro-growth assets."
    U.S. bond yields have surged since Republican candidate
Donald Trump's shock win in U.S. presidential elections on Nov.
8, which led to speculation that his commitment to
infrastructure spending would spur growth and inflation.
    That pushed the dollar sharply higher, with the U.S. unit
hitting its highest since 2003 last week. While it retreated on
Thursday, it remains at highly elevated levels. 
    Germany led euro zone government bond yields higher on
Thursday as the first output cut by major oil producers since
2008 triggered an 8 percent surge in oil prices and boosted
expectations of higher inflation. 
    Gold is highly sensitive to rising interest rates, as these
increase the opportunity cost of holding non-yielding bullion.
    Silver was 0.9 percent lower at $16.34 an ounce,
while platinum was down 0.9 percent at $903.25 after
hitting its lowest since Feb. 8 at $895 earlier in the session.
    Palladium was flat at $769.50, having earlier touched
its highest since June last year at $774.60. It outperformed
other precious metals last month to rise 24 percent, its best
month since February 2008. 
    "Like the base metals ... we believe that palladium has also
become detached from the fundamental data," Commerzbank said in
a note. "We see considerable correction potential." 

 (Additional reporting by Apeksha Nair in Bengaluru, editing by
David Evans and Susan Thomas)
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