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1st LD Writethru: Gold down on U.S. rate hike expectations

Xinhua, November 12, 2015 Adjust font size:

Gold futures on the COMEX division of the New York Mercantile Exchange fell on Wednesday as the expected December Fed rate hike continues to be priced into the market.

The most active gold contract for December delivery fell 3.6 U.S. dollars, or 0.33 percent, to settle at 1,084.90 dollars per ounce.

Low volume was the feature of the day as banks were closed and the market remained open for the U.S. Veterans Day holiday. There were no major releases of news, and no releases of U.S. economic data on Wednesday.

The gold's settlement price was at its lowest in six years, as there are indications that investors are worried about low physical demand for the precious metal as the global economy continues to slow.

Analysts believe that trader expectations for an increase in the U.S. interest rate during the December Federal Open Market Committee meeting (FOMC) put pressure on the precious metal.

Analysts originally expected the rate hike to be delayed until 2016 but the FOMC meeting in late October left the door open for the Fed to raise rates before the end of 2015.

According to the CMEGroup's Fedwatch tool, the current implied probability of a December rate hike is at 68 percent.

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.

The Fed has not hiked its benchmark rate in nearly 10 years, and it's been near zero since the 2008 financial crisis.

Gold was prevented from falling further as the U.S. Dollar Index, a measure of the greenback against a basket of major currencies, fell by 0.2 to 99.01 as of 1755 GMT.

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 9.3 cents, or 0.65 percent, to close at 14.263 dollars per ounce. Platinum for January delivery dropped 16.4 dollars, or 1.82 percent, to close at 883.10 dollars per ounce. Endit