Gold holds declines as expectations firm on 2016 US rate hike

[MELBOURNE] Gold held declines after falling to the lowest in a week as expectations firm over the prospect of the US Federal Reserve raising interest rates this year.

Bullion for immediate delivery was little changed for a second day and traded at US$1,335.80 an ounce at 8:23am in Singapore, according to Bloomberg generic pricing. The metal fell 1.9 per cent Friday to US$1,336.00 an ounce, the lowest since July 29.

"The US is a key driver for gold, and particularly the prospect of a rate rise in 2016," Angus Nicholson, a market analyst in Melbourne at IG Ltd, said by phone. The chances of a rise have strengthened since jobs data released last week, he said.

Labour data released Friday showed US payrolls climbed by 255,000, exceeding all forecasts in a Bloomberg survey of 89 economists. The probability of the Fed raising rates in December has climbed to 47 per cent, from 37 per cent on Aug 4, Fed-fund futures data compiled by Bloomberg show.

Evidence of strength in the world's biggest economy is seen as likely to bolster the Fed's case for a rate hike, IG's Mr Nicholson said.

Rising borrowing costs hurt the appeal of gold and other precious metals because they don't offer yields or dividends unlike alternative investments.

Silver was little changed at US$19.73 an ounce. Platinum rose as much as 0.2 per cent, while palladium fell as much as 0.5 per cent.

BLOOMBERG