Gold near 1-month low as Yellen signals December rate hike

[SINGAPORE] Gold held near a one-month low on Thursday and looked likely to drop below the US$1,100-an-ounce level after Federal Reserve Chair Janet Yellen bolstered market expectations for a US interest rate hike in December.

Ms Yellen pointed to a possible December interest rate lift-off and laid out what now appears the base case at the US central bank - that low unemployment, continued growth and faith in a coming return of inflation means the country is ready for higher interest rates.

Other Fed officials also voiced similar opinions, sending non-interest-paying bullion lower for a sixth straight session on Wednesday.

Spot gold had ticked up 0.3 per cent to US$1,110.10 an ounce by 0319 GMT, staying close to the previous session's low of US$1,106, the weakest since Oct 2.

Gold is about US$30 shy of a 5-1/2-year low of US$1,077 hit in July. It has lost nearly US$60 over the past six sessions.

"We think that a December rate hike is more likely than not and an appropriate market reaction is a lightening up of risk, weaker commodities, higher yields and a firmer dollar," ANZ said in a note.

Yellen's remarks caused investors to reset their expectations of a December rate hike above 60 per cent.

Another top Fed official said on Wednesday that a policy meeting set for Dec 15-16 is a "live possibility" for raising US interest rates for the first time in nearly a decade.

The dollar rose to a three-month high, along with a jump in US Treasury yields, hurting gold, which tends to benefit from a low interest rate environment.

"Bullion weakened after perceivably hawkish monetary policy comments by ... Yellen," said HSBC analyst James Steel. "The next focus for the gold market may shift to the upcoming release of nonfarm payrolls data on Nov 6." A robust US jobs report on Friday could trigger another sell-off in gold, already facing weak technicals and investor outflows.

Assets in SPDR Gold Trust, the top gold-backed exchange-traded fund, fell to 680.11 tonnes on Wednesday - the lowest in six weeks.

"Price action is very bearish, but we expect to find initial support at the October low of US$1,105 and the September low of US$1,100," ScotiaMocatta analysts said.

REUTERS