Gold edged down towards a three-month low on Wednesday, failing to benefit from a softer dollar, as pressure from an anticipated US rate hike as soon as next month persisted. Platinum also came under pressure, sliding to its lowest in nearly seven years as investors continued to liquidate holdings of exchange-traded funds.
Spot gold was down 0.3% at $1,086.31 an ounce by 3.57pm GMT, while US gold futures for December delivery were down $2.40 an ounce at $1,086.10. Increasing bets the US Federal Reserve would raise interest rates in December for the first time in nearly a decade sent bullion, a non-interest-paying asset, to $1,084.90 an ounce on Friday, the lowest since August.
It has been hovering around there since then and is seen vulnerable to further declines, with the next support at its five-and-a-half-year trough of $1,077 hit in July. “If there a December rate hike, the next question is what’s the path, is the Fed going for at least three further increases of 25 basis points but the end of 2016,” Société Générale analyst Robin Bhar said. “In that case, gold will definitely see a move down towards $1,050,” said Mr Bhar.
The dollar index fell 0.1% against a basket of leading currencies, after hitting a seven-month high in the previous session. A robust US nonfarm payrolls report on Friday has strengthened the conviction of economists who have been forecasting a December interest rate increase, according to a Reuters poll published on Tuesday. Assets in SPDR Gold Trust, the top gold-backed exchange-traded fund (ETF), fell to 663.43 tonnes on Tuesday, the lowest since September 2008 when Lehman Brothers filed for bankruptcy kicking off a global financial crisis.
Gold’s recent sharp decline has stoked some physical demand in top consumer Asia. Premiums on the Shanghai Gold Exchange, an indicator of demand in China, were at a healthy $4-$5 an ounce on Wednesday. Sustained physical demand could provide a floor for declining gold prices. On the other hand Platinum slid to its lowest since December 2008 at $879.50 an ounce, before recovering to $883.50, down 1.9%. The white metal has lost more than a quarter of its value this year, hurt by perceptions that supply is plentiful.
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