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1st LD Writethru: Gold down sharply on rate hike talk

Xinhua, October 30, 2015 Adjust font size:

Gold futures on the COMEX division of the New York Mercantile Exchange fell Thursday as the U.S. Federal Reserve indicated that it would consider an increase in the interest rate during its Federal Open Market Committee (FOMC) meeting in December.

The most active gold contract for December delivery fell 28.8 U.S. dollars, or 2.45 percent, to settle at 1,147.30 dollars per ounce.

Gold was put under pressure as the U.S. Federal Reserve indicated on Wednesday's conclusion of its two-day FOMC meeting that an increase in the interest rate would be on its agenda at the December meeting.

Fed's latest FOMC meeting statement coincided with Fed Chairwoman Janet Yellen's remarks given on Sept. 25 at the University of Massachusetts indicating the Fed could still raise interest rates before the end of 2015. Analysts believe trader expectations may line up to reach the conclusion that the Fed will raise rates in December.

Expectations were originally for a delay in the rate hike until 2016. An increase in the Fed's interest rate drives investors away from gold and towards assets with a return, as the precious metal bears no interest. There has not been an increase in the Fed's interest rate since June 2006, before the beginning of the American financial crisis.

The precious metal was prevented from falling further as the U.S. Department of Commerce released the Gross Domestic Product (GDP) report showing the GDP increasing at an annual rate of 1.5 percent in the third quarter of 2015. This was slightly worse than expected. Analysts note steady domestic spending kept the GDP figure up, and further noted final sales rising by a better-than-expected 3.0 percent in the quarter.

Gold was also prevented from falling further as the U.S. Dollar Index fell by 0.27 percent to 97.36 as of 1800 GMT. The index is a measure of the dollar against a basket of major currencies. Gold and the dollar typically move in opposite directions, which means if the dollar goes up, gold futures will fall as gold, measured by the dollar, becomes more expensive for investors.

Silver for December delivery fell 74.3 cents, or 4.56 percent, to close at 15.55 dollars per ounce. Platinum for January delivery fell 19.5 dollars, or 1.93 percent, to close at 993.30 dollars per ounce. Endit