Gold hits seven week low as rate hike expectations rise
* Strong U.S. data raises dollar, U.S. yields
* World stocks hit record high
* ETF holdings fall by most since July
LONDON, Oct 3 (Reuters) – Gold touched its lowest price
level in seven weeks on Tuesday after strong U.S. economic data
reinforced expectations of another interest rate rise in the
United States this year and pushed the dollar and U.S. bond
The CME’s Fedwatch indicator showed markets were pricing in
a 77 percent likelihood of a December rate rise after Monday’s
data showed a surge in U.S. manufacturing activity.
U.S. and world stocks also rose to new records as a positive
global growth outlook encouraged investment in riskier assets.
A strong dollar makes gold more expensive for holders of
other currencies, while higher bond yields reduce the appeal of
Spot gold was up 0.1 percent at $1,272.05 an ounce at
1430 GMT after the dollar and U.S. bond yields weakened from
earlier highs. But the gold price earlier touched $1,267.76, its
lowest level since Aug. 15 and down more than 6 percent from a
one-year high of $1,357.54 in early September.
U.S. gold futures for December delivery were 0.1
percent lower at $1,274.50 an ounce.
“The factors that pushed gold towards $1,360 in early
September are now reversing,” Julius Baer analyst Carsten Menke
“The U.S. dollar and yields have rebounded from their recent
lows and it looks like positioning in the gold futures market is
somewhat reversing, with some long covering and new shorts.”
The net long position of hedge funds and money managers in
COMEX gold rose nine-fold in the two months to mid-September,
helping push prices higher, but has since fallen sharply.
Menke said he expected a strengthening dollar and
normalisation of speculative positioning to push gold to $1,200
an ounce by the end of the year.
Prices have also been supported by purchases of physical
gold by bullion-backed exchange-traded funds. But ETF holdings
tracked by Reuters dropped between Friday and Monday by the most
since late July.
On the technical side, gold was holding around its 100-day
moving average at $1,272.
“This figure will be the key today in restricting any
further declines,” MKS PAMP trader Sam Laughlin said in a note.
“Should gold continue to trade lower, the next target will be
the 200-day moving average and key psychological level
Meanwhile silver was up 0.4 percent at $16.61 an
ounce but still near its lowest level since Aug. 9.
Platinum was 0.3 percent higher at $913.30 and
palladium was down 0.1 percent at $908.70 an ounce,
slipping below platinum after reaching price parity for the
first time in 16 years last week.