Gold drops to more than 5-mth low as dollar strengthens

Gold fell 1 percent on Monday to hit its lowest in more than five months, pressured by a stronger U.S. dollar and expectations the Federal Reserve will raise interest rates in December.

Spot gold was down 0.7 percent at $1,217.21 an ounce by 0451 GMT. The metal fell as much as 1 percent to $1,213.15 an ounce earlier in the session – its lowest since June 3.

U.S. gold futures were down 0.6 percent to $1,216.90 per ounce.

The dollar rose to a nine-month high against a basket of major peers on Monday as the risk of faster domestic inflation and wider budget deficits sent Treasury yields ever higher.

Yields on the U.S. 10-year Treasury notes climbed to their highest since January on Monday at 2.20 percent.

A broad sell-off in global commodities and surging bond yields had seen the metal dipping nearly 3 percent on Friday.

“What we’re seeing today is the continuation of long liquidation going through the market,” said Jeffrey Halley, senior market analyst at OANDA.

“People seem to have unwound their Trump-risk and are now talking more about ‘Trumpflation’, with Trump’s fiscal policies that he wants to enact with all this infrastructure that would push up inflation and that would push up borrowing rates and yields in the States,” Halley said.

The market is also betting on the Federal Reserve raising interest rates more quickly. The metal is highly sensitive to rising U.S. interest rates, which can lift the opportunity cost of holding non-interest-bearing gold.

“The rate hike in December is an absolute done deal now,” Halley added.

Fed Vice Chair Stanley Fischer said on Friday that U.S. economic growth prospects appear strong enough for the Fed to proceed with a gradual increase in interest rates.

“We are still negative on gold short-term in light of a stronger dollar, rising rates and rising equities,” said INTL FCStone analyst Edward Meir.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.76 percent to 934.56 tonnes on Friday.

Spot gold may find support in a zone of $1,204-$1,210 per ounce and bounce moderately before falling, as suggested by its wave pattern and a Fibonacci ratio analysis, according to Reuters technical analyst Wang Tao.

Silver fell 0.6 percent to $17.23 an ounce. Earlier in the session, it touched its worst since June 9 at $17.00.

Platinum slipped 0.4 percent to $936.24 an ounce and palladium dropped 0.36 percent to $669.80.

Source: Reuters