Gold little changed, awaiting direction on US rates

US gold futures ends the session up 0.2% at $1,269.50 per ounce

Gold was little changed on Thursday, pressured by a persistently strong dollar as the market awaits more signs about the timing of an expected US interest rate rise from the Federal Reserve.

Bets that the Fed will raise rates have driven the dollar to nine-month highs against a basket of currencies this week and limited gains in gold. The dollar index was about 0.3 per cent higher on Thursday.

Spot gold > was up 0.3 per cent at $1,270 an ounce by 3:11 pm EDT (19:11 GMT), while US gold futures ended the session up 0.2 per cent at $1,269.50 per ounce. Spot gold has traded in a $16 range over the last week.

 

"The constant strength in the US dollar serves as an inhibiting factor to the upside. We were higher, volume was moderate with little real enthusiasm to speak of," said Bill O'Neill, co-founder of LOGIC Advisors.

"I think short term, the interest rate concerns are there ... but long term I still think the market is going to go higher."

Gold is an alternative investment during times of political and financial uncertainty such as the US presidential election in November, while higher interest rates lift the opportunity cost of holding non-yielding assets and boost the dollar, in which gold is priced.

Higher physical demand in India, the world's second-biggest consumer of gold, is helping prices and preventing a selloff ahead of an expected Fed interest rate increase in December, analysts say.

Festivals in India, such as Diwali and Dhanteras, when gold is traditionally given as gifts, are approaching, which is typically followed by increased demand because of the wedding season.

"Physical demand from Asia continues to underpin the market at present, with gold continuing to consolidate for the time being between $1,250-75," MKS PAMP Group trader Sam Laughlin said.

According to estimates from Macquarie, Chinese gold imports in September rose 58 per cent to $6 billion, or 118 tonnes, from August but are down 25 per cent from a year ago.

Strong physical demand for gold is being also countered by continuing selling by gold exchange-traded funds.

SPDR Gold Trust , the world's largest gold-backed ETF, said its holdings fell 1.49 per cent to 942.59 tonnes on Wednesday.

Silver > was up 0.1 per cent at $17.60 an ounce, while platinum > was up 0.2 per cent at $963.75. Platinum rose to more than a two-week high of $970.80 on Wednesday.

Palladium > fell 1.5 per cent to $611.95 per ounce.