Gold holds near three-month low as jobs gains fuel Fed rate bets

[SINGAPORE] Gold held near a three-month low after a government report showed the pace of US jobs growth accelerated in October, backing the case for higher interest rates in December.

Bullion for immediate delivery climbed 0.4 per cent to US$1,093.67 an ounce at 11:27 aM in Singapore, according to Bloomberg generic pricing. Prices sank as much as 1.7 per cent on Friday to US$1,085.56, the lowest since Aug 7.

Gold investors are seeking to divine when US rates will rise for the first time since 2006, as higher borrowing costs dent bullion's appeal. The 271,000 gain in payrolls was the biggest this year and exceeded all estimates in a Bloomberg survey, a Labor Department report showed on Friday. Fed Chair Janet Yellen last week said improvements in the US economy meant an increase next month was a 'live possibility' if economic data hold up.

"The US jobs data have greatly boosted confidence of a December rate rise," Xu Wenyu, a Shanghai-based analyst at Huatai Great Wall Futures Co said by phone.

"Money has been flowing out of gold. We may see occasional spurts of buying, but gold remains on a downtrend."

Investors cut their holdings in bullion-backed funds to the smallest in more than two months. Gold assets in exchange-traded products shrank 1.8 per cent last week to 1,512.79 metric tons, according to data compiled by Bloomberg. Fed-fund futures data show odds that policy makers will increase rates in December has risen to 68 per cent on Friday from 50 per cent a week earlier.

Spot silver and platinum are dropping for an eighth day, both the longest streaks since March, while palladium fell 0.7 per cent after a 2.4 per cent gain on Friday. Bullion of 99.99 per cent purity declined as much as 1.8 per cent to 223.25 yuan (S$49.57) a gram on the Shanghai Gold Exchange, the lowest since Aug 11.

BLOOMBERG