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Gold hits 9-mth low as data sparks fear of rate hike in US

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Mumbai : Futures contracts of gold on domestic bourses hit a nine-month low because the rupee strengthened against the dollar, and as robust economic data released in the US on Wednesday reignited fear that the Federal Reserve will raise rates in December.

A firm rupee against the dollar makes the purchase of dollar-denominated commodities such as gold cheaper for holders of the Indian currency.

On Wednesday, payroll services provider ADP said companies in the US added 216,000 jobs in November, beating estimates. Also, data showed that personal income in the US increased 0.6% in October, against the consensus estimate of 0.4%.


At 1725 IST, the most active February contract of gold on the Multi Commodity Exchange of India was down 0.56% at 28,040 rupees per 10 gm after hitting a nine-month low of 28,021 rupees.

The same-month contract on the COMEX was down 0.4% at $1,169.5 an ounce.

“A December rate hike in the US is already discounted in the prices,” said P. Rao, head of commodities research at Anand Rathi. “If, by surprise, there is no rate hike, then gold will probably go higher. But the probability of that happening is very slim.”

A near-term rate hike in the US points to the central bank’s optimism on the economy, which bodes well for the greenback and weighs on safe-haven assets such as gold.

Reflecting negative sentiment for the yellow metal, assets of SPDR Gold Trust fell by 1.18 tn on Wednesday to 883.86 tn, the least since June, according to data on the website of the world’s largest exchange-traded fund.

Traders and investors will focus on data on unemployment claims in the US, due to be released on Thursday.

In India, demand for gold in spot markets has been weak despite the wedding season because “people have no money in hand” following the government’s move to withdraw 500- and 1,000 rupee currency notes, said Kumar Jain, a Mumbai based trader.

Jewellers are selling gold at a slight discount to international prices provided consumers make payments in new currency notes.

Futures contracts of silver on domestic bourses were down, taking cues from the yellow metal. The most active March contract of silver on the MCX was down 0.9% at 40,607 rupees a kg, while the same-month contract on the COMEX was down 0.5% at $16.4 an ounce.    –Cogencis