Gold prices fell to a fresh four-month low Thursday, as strong U.S. economic data bolstered the case for the Federal Reserve to raise interest rates in coming months.
Gold for December delivery closed down 1.2% at $1,253 a troy ounce on the Comex division of the New York Mercantile Exchange, its lowest settlement since early June.
The number of Americans applying for first-time unemployment benefits fell back toward a four-decade low last week, a report showed Thursday, a sign of economic strength ahead of Friday’s closely watched jobs data. Strong employment numbers for September would help cement the argument for a rate increase in December, hurting gold, which struggles to compete against yield-bearing investments when borrowing costs rise.
Signs of a more robust economy and a series of hawkish comments from Fed officials have dented the precious metal, bringing the price down nearly 5% since Friday.
Despite those losses, “traders are not eager to buy yet,” said George Gero, a managing director at RBC Capital Markets. “They want to see how the jobs numbers play out. I don’t think the selling is over.”
Fed-funds futures, used to bet on central-bank policy, on Thursday showed investors and traders assigned a 63.9% likelihood of a rate increase in December, up from just below 60% a day ago.
Gold’s recent weakness could stimulate physical demand, said Commerzbank AG in a note. While Chinese buyers are away from their desks for this week’s national holiday, Indian demand is likely to pick up, the bank
said.
With the festival season and the religious holidays of Diwali and Dussehra just around the corner, not to mention the subsequent wedding season, India should also import larger quantities of gold again in the coming months,”Commerzbank wrote.
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