Precious Gold inches lower on rebounding dollar, U.S. rate rise views

by **Cals** Thu 10 Dec 2015, 22:30

Precious

[size=28]Gold inches lower on rebounding dollar, U.S. rate rise views

By Reuters / Reuters | December 10, 2015 : 8:34 PM MYT

LONDON (Dec 10): Gold edged lower on Thursday, as the dollar rebounded and investors remained cautious ahead of a widely-anticipated U.S. interest rate rise next week.

The Federal Reserve is expected to raise rates for the first time in nearly a decade at its next policy meeting on Dec 15-16. Higher rates should dent demand for non-interest-paying gold, which has already lost 9% of its value this year and is on track for its third year of losses.

Spot gold was down 0.1% at US$1,071.89 an ounce by 1102 GMT, while U.S. gold futures were down 0.4% at US$1,072.60 an ounce.

"Given the level of distress across the commodities complex, it wouldn't be surprising to see a test towards the US$1,000 level," ING Bank senior strategist Hamza Khan said.

"It is going to be a case of significant tension before the rate hike ... after the Fed gives us a little bit more clarity we could start looking at the supply and demand fundamentals again."

The metal slid to US$1,045.85, its lowest since February 2010, last week, when the dollar spiked to its highest level in 12-1/2 years, following Fed chair Yellen's hint at a U.S. rate rise later this month.

The technical picture for gold looks neutral at US$1,064-$1,084, but the bias is towards the downside, Reuterstechnical analyst Wang Tao said.

The dollar rose 0.4% against a basket of leading currencies, recouping some of the 1.1% losses made on Wednesday.

A slide in the oil price to a seven-year low, along with a dip in broader commodity markets, added pressure to gold.

Weakness in oil could trigger fears of deflation, a bearish factor for gold, which is often used as a hedge against oil-led inflation.

In physical markets, gold premiums in India fell this week as a modest rebound in prices from multi-year lows prompted consumers to postpone purchases, but buying interest in China remained strong ahead of the spring festival early next year.

Silver rose 0.3% to US$14.16 an ounce.

Platinum gained 0.2% to US$855.74 an ounce, after touching a seven-year low last week, and palladium was up 0.8% at US$552.41 an ounce.

"Selling pressure from deleveraging and short selling, combined with an absence of buying interest, seems to be behind (platinum and palladium) price weakness as buyers have stepped to the sidelines to buy on a hand-to-mouth basis," Scotiabank said.

"Given the significant sell-off in prices in 2015, we believe 2016 will see prices recover and that in turn is likely to prompt bargain hunting and restocking."
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