Gold pressured by Fed rate hike prospects

Gold nudged lower on Monday amid uncertainty about the timing of an interest hike by the U.S. Federal Reserve, while a stronger dollar added to pressure on bullion.

Spot gold was down nearly 0.2 percent at $1,263.45 an ounce at 0430 GMT, while U.S. gold futures fell about 0.3 percent to $1,264.40.

“Given the risk is just going to be increased, most people are going to liquidate a part of their holdings, just to place themselves in a safer position,” said Mark To, head of research at Hong Kong’s Wing Fung Financial Group.

“Ahead of the U.S. elections results, it will move around the level $1,250 to $1,270 without much momentum to go up,” he added.

Third-quarter growth figures from the United States and Fed policymakers speeches due this week will be closely watched by the market for clues on a possible interest rate hike.

Hedge funds and money managers cut their net long positions in COMEX gold for a third straight week in the week to Oct. 18, U.S. Commodity Futures Trading Commission data showed on Friday.

San Francisco Fed President John Williams on Friday redoubled his call for raising rates soon, telling reporters after a speech here that “this year would be good” for a rate rise that he had wanted to take effect last month.

Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.

The dollar index was up nearly 0.1 percent at 98.77, making gold more expensive to buyers using other currencies.

“People are watching the U.S. elections and the data is on the positive side, favorable for a rate hike. As long as prices stay below the $1,300 mark, the downward trend might continue,” said Hareesh V, research head of Geofin Comtrade.

“Prices need to break convincingly above the $1,300 level for a strong upside movement.”

Spot gold is biased to retest a support at $1,261 per ounce, a break below which could cause a loss to $1,251, according to Reuters technical analyst Wang Tao.

Silver remained broadly flat at $17.48 an ounce.

Platinum was up about 0.6 percent at $934.95 an ounce, after touching a low of $921.20 on Friday, its worst since Feb. 29.

Palladium, which touched an over 3-month low of $613.10 in the previous session, rose 0.6 percent at $627.90.

Source: CNBC