LONDON: Gold prices fell on Tuesday as the dollar strengthened on increasing bets that the Federal Reserve will raise US interest rates in December.
Chicago Fed President Charles Evans, speaking in Sydney on Tuesday, said he “could be fine” with raising US interest rates in December, but that he would prefer to see how the economy and inflation progressed before deciding.
Traders have priced in a 70 per cent chance that the Fed will raise rates at a Dec. 13-14 meeting, up from 66 per cent early on Friday, according to CME Group’s FedWatch tool.
Spot gold had dropped 0.3 per cent to $1,256.05 an ounce by 1310 GMT. US gold futures fell 0.2 per cent to $1,257.60 an ounce.
“A stronger dollar is weighing on most commodities and there is the outlook for the Fed potentially raising rates in December, which is damaging for gold,” ING commodity strategist Warren Patterson said.
Bullion touched a four-month low of $1,241.20 an ounce on Friday and registered its biggest weekly drop for 11 months, down 4.5 per cent, after forecast-beating US data and comments from Fed officials saying there was a strong case for raising rates.
“Funds have been quite reluctant to let go of the longs, but once the $1,300 level was broken, the flood gates just opened,” Saxo Bank senior manager Ole Hansen said.
The dollar hit an 11-week high against a basket of six major currencies, making dollar-denominated gold more expensive for holders of other currencies.
Investors are also waiting for Wednesday’s release of minutes of the latest Federal Reserve Open Market Committee meeting to see how close the central bank was to hiking rates last month.
Gold is highly sensitive to increases in US interest rates, which can lift the opportunity cost of holding non-interest-bearing gold.
Among other precious metals, silver was down 0.7 per cent at $17.51 an ounce.
Platinum was 0.3 per cent lower at $957.40 an ounce and palladium fell 1.5 per cent to $655.30.
