Gold Holds Near Three-Month Low on Rate Outlook Before Jobs Data

(October 6, 2016 - by Ranjeetha Pakiam, Eddie Van Der Walt)

Gold held near a three-month low as investors awaited Friday’s U.S. jobs report for more clues on when the Federal Reserve will raise interest rates amid growing expectation for a hike soon.

Gold was little changed at $1,267.80 an ounce by 11:59 a.m. in London. It has been rattled this week by rising bond yields and concern that policy makers are starting to question whether monetary easing will be enough to revive the global economy. Ultra-low rates are not necessarily here to stay, Fed Vice-Chairman Stanley Fischer said Wednesday.

Higher borrowing costs curb the appeal of holding gold because it doesn’t return any yield. Traders see a 62 percent chance that the Fed will raise rates by year-end, up from 51 percent at the start of last week.

“If the U.S. employment report is better than expected, the risk of a break below $1,259 is high,” Georgette Boele, a currency and commodity strategist at ABN Amro in Amsterdam, said by e-mail, referring to gold’s 200-day average. “This would mean that this year’s uptrend is over.”

Bullion for immediate delivery plunged 3.3 percent on Tuesday, the most in more than a year, according to Bloomberg generic pricing. That took prices below the 100-day moving average, a measure which some analysts and traders use to calculate technical support levels.

While prices dropped the previous seven days in the longest run of losses since May, investors have been adding to holdings in exchange-traded funds. Assets climbed for a fourth day to 2,037.5 metric tons on Wednesday, near the highest since 2013, data compiled by Bloomberg show.