SINGAPORE: Gold traded near a five-year low as investors sold bullion-backed funds amid expectations the US will increase interest rates this year, damping the appeal of the metal.
Bullion for immediate delivery slid as much as 0.4 per cent and traded down 0.1 per cent at $1,083.85 by 10.51am in London, according to Bloomberg generic pricing. It reached $1,074.25 on Thursday, the lowest since February 2010, and is down for 11 of the past 12 days.
Gold is heading for a third annual loss as investors brace for the first US interest rate increase since 2006 when Federal Reserve officials meet next month. New York Fed President William C. Dudley said the conditions for lift-off “could soon be satisfied.”
There’s a 66 per cent probability of a move in December, Fed-fund futures data show. Higher rates make metals less competitive against assets that pay interest or offer dividends.
“Weighing on gold price is increased expectations about the Fed’s interest rate hike,” Kotak Commodities Services Ltd. said in a report Friday. “Exchange-traded funds outflows also indicate weaker investor interest in gold.”
Global holdings in exchange-traded products backed by gold dropped to 1,507.25 metric tons on Thursday, the lowest since March 2009, data compiled by Bloomberg show. Investors sold bullion through ETPs for a 10th straight day, the longest streak since July.
“Gold will probably continue to just weaken marginally, we don’t think there’s much more to go because the market’s now factoring in a December interest rate hike,” David Lennox, an analyst at Fat Prophets, said by phone from Sydney.
Palladium plunged as much as 5 per cent before trading down 1.9 per cent at $549.85 an ounce. Prices are down 11 per cent this week, headed for the biggest weekly drop since September 2011. Platinum declined as much as 0.9 per cent to $869.95 an ounce, the lowest since December 2008, before erasing its losses.
