Gold price sits tight as possible U.S. rate hike looms

Singapore (Dec 10)  Gold was treading water on Thursday as investors stuck to the sidelines ahead of a widely anticipated U.S. interest rate hike next week, with even a slump in the dollar failing to trigger interest in the metal.

Bullion investors are cautious as the U.S. central bank is expected to raise 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 remains locked in a fairly tight range as investors
are either sitting on the sidelines or are set in their
positions already leading into next week's FOMC meeting," ANZ
said in a note published Thursday, referring to the Federal Open
Market Committee of the U.S. Federal Reserve.
    Spot gold was steady at $1,073.58 an ounce by 0642
GMT, after closing down 0.1 percent in the previous session.
    The metal last week slid to $1,045.85, its lowest since
February 2010, but has recovered modestly on short covering.
    The technical picture for gold looks neutral at
$1,064-$1,084, but the bias is towards the downside, Reuters
technical analyst Wang Tao said.
    Gold failed to log gains despite a 1.1 percent drop in the
dollar index on Wednesday to its lowest in a month.
    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.
    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.
    In the physical markets, 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.

Source: Reuters