Gold drops from one-month high

LONDON/SINGAPORE: Federal Reserve Chair Janet Yellen dealt a blow to gold bulls who had pushed prices to the highest in a month. Yellen on Thursday said the central bank is on track to raise interest rates this year. Her message was consistent with other policymakers who have talked up the prospect of higher rates since last week’s policy meeting. The Fed decided to keep rates unchanged at a record low at that meeting, citing concerns about weaker-than-hoped-for inflation and the impact of the slowdown in China.

Higher borrowing costs curb the appeal of the metal, which doesn’t pay interest or give returns like other assets such as bonds and equities. Before Yellen’s comments, bullion had climbed as much as 2.2 per cent as data showed orders for US durable goods fell in August.

“Higher US rates is a major positive for the dollar and bad news for gold,” Georgette Boele, a strategist at ABN Amro Bank NV in Amsterdam, said by email. “Financial markets had adjusted their expectations downwards for such a rate hike after last week’s meeting. Gold should go down further.”

Gold price

Bullion for December delivery dropped 0.9 per cent to $1,143.10 (Dh4,195.2) an ounce by 8.08am on the Comex in New York. The first decline in three days pared the metal’s second straight weekly increase. Prices reached a five-year low in July.

Traders now see a greater chance the Fed will raise rates by year-end. There’s a 47 per cent probability the central bank will increase rates by its December 15-16 meeting, up from 43 per cent two days ago, according to data compiled by Bloomberg based on futures. That’s still down from 60 per cent odds at the end of August.

The Bloomberg Dollar Spot Index climbed for the fifth time in six days, heading for its biggest weekly advance since mid- July.

Investors had boosted holdings in gold-backed funds to the highest in three weeks, data compiled by Bloomberg show. They bought 8.4 metric tonnes in the three days through Thursday, the most since August. Assets reached a six-year low of 1,508.2 tonnes last month.

Silver for December declined 0.5 per cent to $15.06 an ounce in New York. Platinum for January slipped 0.8 per cent to $947.80 an ounce after reaching a six-year low on Wednesday. Prices dropped this week on concern Volkswagen AG’s emissions scandal may cut demand for the metal that’s mainly used to cut pollution from diesel vehicles.

Palladium, mostly used to curb harmful emissions in gasoline types, rose 2 per cent to $669.40 an ounce. It’s heading for an 9.6 per cent weekly advance, the most since 2011.