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1st LD Writethru: Gold down on strong U.S. dollar, rate hike speculation

Xinhua, November 4, 2015 Adjust font size:

Gold futures on the COMEX division of the New York Mercantile Exchange fell Tuesday as a stronger U.S. dollar and Fed rate hike speculation put pressure on the precious metal.

The most active gold contract for December delivery fell 21.8 U.S. dollars, or 1.92 percent, to settle at 1,114.10 dollars per ounce.

Gold was put under pressure as the U.S. Dollar Index rose by 0.36 to 97.26 as of 1805 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.

The precious metal was put under further pressure as traders eagerly awaited two key measures of employment, which analysts believe may seal the fate of a rate hike during the December Federal Open Market Committee (FOMC) meeting. The ADP Employment Report is due out on Wednesday, which will hint at the more important monthly jobs report Friday.

According to the CMEGroup's Fedwatch tool, the current implied probability of a December rate hike is 52 percent, which is higher than the implied probability of a rate hike in September and October. Expectations were originally for a delay in the rate hike until 2016 but the FOMC meeting in late October confirmed that the Fed wants to raise rates before the end of 2015. 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 international trade report from the U.S. Department of Commerce is also due out on Wednesday, and the weekly jobless claims are due out on Thursday. Analysts believe both reports, in addition to the ADP Employment Report, will likely provide the most accurate preview for the Friday monthly employment situation report.

Silver for December delivery fell 16.9 cents, or 1.10 percent, to close at 15.239 dollars per ounce. Platinum for January delivery fell 16.2 dollars, or 1.66 percent, to close at 962.20 dollars per ounce. Endit