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1st LD Writethru: Gold down as rate hike speculation continues

Xinhua, October 31, 2015 Adjust font size:

Gold futures on the COMEX division of the New York Mercantile Exchange fell Friday as traders continued to speculate on the potential for a U.S. rate hike.

The most active gold contract for December delivery lost 5.9 U.S. dollars, or 0.51 percent, to settle at 1,141.40 dollars per ounce.

Gold was put under pressure as traders continued to speculate on the possibility of a U.S. Federal Reserve rate hike. The current implied chance of a rate hike during the December meeting is 54.3 percent according to the CMEGroup's Fedwatch tool, compared with the chance for the January meeting at 62 percent, according to the same tool. 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.

Gold was given support and prevented from falling further as a report released by the U.S. Department of Commerce showed that inflation was not building at the U.S. Federal Reserve's desired target. The Personal Income and Outlays report showed the key measure, called the core PCE price index, increased by a lower-than-expected 0.1 percent in September.

Many analysts believe that the personal income and outlays report is the U.S. central bank's favorite measure of inflation, and that while the bank has recently indicated during its October meeting that it will consider raising rates during December meeting, this measure indicates that the U.S. inflation rate is not necessarily where the Fed would want it.

The U.S. Dollar Index fell by 0.42 percent to 96.80 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 added 1.7 cents, or 0.11 percent, to close at 15.567 dollars per ounce. Platinum for January delivery fell 4.2 dollars, or 0.42 percent, to close at 989.10 dollars per ounce. Endit