Gold price dips to 4-week low on fears of Fed rate increase

London (Nov 2)  Gold fell to its lowest level in four weeks on Monday, extending a sell-off into a fourth straight session as investors feared the Federal Reserve would hike US interest rates this year.

The technical picture for gold has deteriorated, with traders warning of further price drops. Physical demand and investor flows have also not supported the metal.

Spot gold had eased 0.24 percent to $1,138.7 an ounce by 5:03 pm Beijing time, after earlier dropping to $1,134.60, its lowest since October 5.

Gold had rallied in October on speculation that the softness in the global economy could prompt the Fed to delay the rate hike to next year. But the US central bank's hawkish tone last week triggered a sell-off in bullion.

Technical selling and liquidation of long positions were sending prices lower, according to HSBC analyst James Steel.

"Gold probably needs moderately better emerging market import demand if it is to sustain a rally. In the near term, the market also needs a respite from investor liquidations if prices are to stabilize," Steel said.

Asian gold demand saw an uptick near the end of last week, as lower prices attracted buyers. But local premiums remained largely unmoved, a sign that demand hasn't picked up in a significant way, dealers said.

Demand outside of Asia also remained soft. US Mint American Eagle gold coin sales slumped 73 percent in October.

Investors were seen reducing their gold exposure. Assets in SPDR Gold Trust, the top gold-backed exchange-traded fund, fell 0.3 percent to 692.26 tons on Friday.

Speculators trimmed a bullish bet in gold from an eight-and-a-half-month high in the week ended October 27, while they boosted a net long stance in silver to the highest level on record.

Traders have been selling gold since the Fed on Wednesday surprised with a direct reference to its next policy meeting as a possibility for the first US rate hike in nearly a decade.

The metal had posted its worst weekly drop in nine weeks on Friday.

Rising interest rates tend to weigh on gold because they increase the opportunity cost of holding non-yielding bullion.

Gold failed to see safe-haven bids on Monday despite weakness in the dollar and equities. Asian stocks slid after soft Chinese factory surveys stoked global growth concerns, while the dollar slipped.

Source: Reuters