Gold price drops from 3-month high on profit taking
London (Oct 13) Gold fell 1 percent on Tuesday as sellers took advantage of the previous session's three-month high to book profits, though losses were limited by expectations the Federal Reserve will not lift U.S. interest rates this year.
Spot gold was down 0.9 percent at $1,153.70 an ounce at 1130 GMT, while U.S. gold futures for December delivery were down $11.10 an ounce at $1,153.40.
Spot prices hit a three-month high of $1,169 on Monday as bets that the Fed would hold off raising rates benefited the metal.
"We've seen some selling into the rally above $1,155, the 50 percent retracement of the May high to July low," Mitsubishi analyst Jonathan Butler said. "We've only been above that level a couple of times since August."
"Some investors are looking to book some profits, given the scale of the move," he said. "Still, gold is on an uptrend from the lows of July."
Gold has rallied nearly 5 percent since a surprisingly weak U.S. nonfarm payrolls report on Oct. 2 prompted the market to shift expectations of a Fed rate hike to 2016.
The metal, as a non-interest-paying asset, benefitted from ultra-low interest rates following the financial crisis, but fell to 5-1/2 year lows this year on expectations that U.S. rates would rise for the first time in nearly a decade.
The Fed refrained from hiking rates at its last meeting in September, citing concerns with the global economy and volatility in financial markets. It holds two more policy meetings in 2015: on Oct. 27-28, and then in December.
In one of the strongest defences yet of a go-slow approach to rate policy, Fed Governor Lael Brainard said on Monday that the U.S. central bank should hold off on any rate hike until it is clear that a global slowdown, trouble in China and other international risks will not push the U.S. recovery off course.
On the physical markets, gold discounts in India widened to a three-month high this week as retail demand remained sluggish amid ample supplies and higher prices. Buying elsewhere in Asia, including top consumer China, was also lacklustre.
MKS said in a note on Tuesday that gold and silver were intially dragged lower by platinum overnight in Asia, though they briefly rebounded prior to the opening of the Shanghai Gold Exchange. "Once the SGE opened, selling in gold and silver accelerated," it said.
Silver was down 1.1 percent at $15.66 an ounce, while platinum was down 1.9 percent at $975.25 an ounce and palladium was down 0.9 percent at $686.25 an ounce.
Source: Reuters
