Gold price falls to lowest since 2010

New York (Nov 27)  As probability of Federal Reserve increasing interest rates goes up to 74%. Ranjeetha Pakiam and Kevin Crowley. Investing in real gold than gold bullion and gold coins

Gold fell to the lowest in five years as bets that the US will raise interest rates next month increased, curbing the metal’s appeal.

The probability of the Federal Reserve increasing interest rates for the first time since 2006 rose to 74%on Friday from 72% yesterday, Fed-fund futures data show. The US dollar, which typically moves inversely to gold, rose 0.1% against a basket of 10 leading global currencies.

Raising rates “increases the opportunity cost of holding gold,” said Bernard Dahdah, a precious-metals analyst at Natixis in London. “Gold has zero yield — it actually costs you money to hold it — so there’s more incentive to put your money into a yield-earning dollar investment.”

Bullion for immediate delivery dropped 0.7% to $1 064.83 an ounce at 10:31am in London, according to Bloomberg generic pricing. If the decline holds, gold is headed for its sixth straight week of losses, the longest such run since August.

The metal is trading at its lowest levels since February 2010 as investors weigh the prospects of higher US interest rates after data pointed to a strengthening economy. With gold typically seen as a haven asset, demand for the metal is falling on the prospect of higher returns in US securities.

Platinum declined 1% to $844.18 an ounce, close to a seven-year low. Palladium dropped 0.4% to $554.58 an ounce. Holdings in palladium-backed exchange-traded products are headed for an eighth weekly decline, according to data compiled by Bloomberg through Wednesday. That would be the longest run in data going back to 2007.

Source: Mineweb