Gold price close to 3-month low on U.S. rate hike prospects
London (Nov 10) Gold was mired near a three-month low on Tuesday as the dollar edged towards a seven-month peak on prospects the U.S. Federal Reserve will raise interest rates for the first time in a decade in December.
A forecast-beating U.S. October employment report on Friday pushed up bets the Fed will increase rates, sending non-interest-paying gold to $1,084.90 an ounce, the lowest level since August.
Spot gold was up 0.1 percent at $1,092.55 an ounce by 1059 GMT, while U.S. gold for December delivery gained $4.40 to $1,092.50 an ounce.
Although bullion ended an eight-day losing run on Monday, the technical picture has weakened and the next support is set at the 5-1/2-year trough of $1,077 hit in July, analysts said.
"A lift-off by 25 basis points in December is pretty token but it is the first interest rate hike in almost a decade and the market is prepared for this," Mitsubishi Corp strategist Jonathan Butler said.
"It's very possible we are going to see a breach of the $1,077 support ... particularly if the ECB starts to expand their quantitative easing programme in December, then we may see some further strength in the dollar."
The dollar was up 0.1 percent against a basket of currencies, close to a seven-month peak hit on Friday after the U.S. jobs data.
The U.S. currency was strong against the euro after four governing council members said a consensus is forming at the European Central Bank to take one of its benchmark interest rates deeper into negative territory in December. The ECB last month raised the prospect of more monetary easing at its Dec. 3 meeting to combat ultra-low inflation.
After a potential rate hike in December, the U.S. central bank may take its time in raising rates further which should be broadly supportive for gold, said INTL FCStone analyst Edward Meir.
But Meir said the metal faces more weakness in the near term and "poor technicals and a buoyant dollar do not help gold's upside case much either".
Among other precious metals, spot platinum fell 0.1 percent to $909.25 an ounce after hitting a one-month low of $904.75 in the previous session. Palladium gained 1.9 percent to $607.25 an ounce, partially recovering a 4-percent percent fall to $592.50 an ounce on Monday, its lowest in seven weeks. Silver slipped 0.3 percent to $14.47.