Gold held a decline to near a one-month low as investors awaited the US Federal Reserve’s decision this week on whether to raise borrowing costs.
Bullion for immediate delivery yesterday retreated as much as 0.3 percent to US$1,104.82 an ounce and traded little changed at US$1,108.20 by 2:59pm in Singapore, according to Bloomberg generic pricing. The metal fell to US$1,098.80 on Friday, the lowest intraday level since Aug. 11.
While about half of the economists in a Bloomberg survey expect a rate increase given the improvement in the US labor market, futures traders are showing odds of 28 percent, with the chances for a year-end rise at 59 percent.
Higher borrowing costs cut gold’s allure because it does not pay interest like competing assets such as bonds. Fed policymakers meet tomorrow and Thursday.
“There’s a good chance for the Fed to give an interest rate hike, at least this year, be it this month or December,” OCBC Bank (華僑銀行) economist Barnabas Gan said by phone in Singapore.
“The gold price, at this juncture, looks like it is pricing in a Fed rate hike, and if the rate hike doesn’t materialize, gold prices may see a very small bump,” Gan said.
Holdings in global exchange-traded products backed by bullion dropped for six days through Friday last week, according to fund data compiled by Bloomberg.
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