Gold sits tight as possible US rate hike looms

By: |
Singapore | Published: December 10, 2015 7:14:51 AM

Gold was treading water on Thursday as investors stuck to the sidelines ahead of a widely anticipated U.S. rate hike next week, with even a slump in the dollar failing to trigger interest in the metal.

GoldGold was treading water on Thursday as investors stuck to the sidelines ahead of a widely anticipated U.S. rate hike next week, with even a slump in the dollar failing to trigger interest in the metal. (Reuters)

Gold was treading water on Thursday as investors stuck to the sidelines ahead of a widely anticipated U.S. rate hike next week, with even a slump in the dollar failing to trigger interest in the metal.

FUNDAMENTALS

* Spot gold was little changed at $1,073.31 an ounce by 0043 GMT, after closing down 0.1 percent in the previous session.

* Bullion investors are cautious as the U.S. central bank is expected to raise interest rates for the first time in nearly a decade at its next policy meeting on Dec. 15-16.

* Higher rates should dent demand for non-interest-paying gold, which has already lost 9 percent of its value this year and is on track for its third year of losses.

* Gold was steady despite a 1.1-percent drop in the dollar index on Wednesday.

* A softer dollar makes greenback-denominated gold cheaper for holders of other currencies, and typically sends gold prices higher. But the looming U.S. rate hike is keeping a lid on prices, which fell to near-six-year lows last week.

* The Fed will move very gradually after it delivers what is widely expected to be its first interest rate hike in nearly a decade next week, according to a Reuters poll that points to a tame inflation outlook for next year.

* A slide in the oil price to a seven-year low, along with a dip in the broader commodity markets, added pressure to gold.

* Weakness in oil could trigger fears of deflation, a bearish factor for gold, which is often used as a hedge against oil-led inflation.

* Gold premiums in India fell this week as a modest rebound in prices from multi-year lows prompted consumers to postpone purchases, but buying interest in China remained strong ahead of the spring festival early next year.

* One of the most popular temples in India may soon make the first substantial contribution to Prime Minister Narendra Modi’s plan to recycle tonnes of idle bullion to reduce imports and the country’s current account deficit.

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