Gold Price Falls Amid Stronger Dollar and Expectations for US Rate Rise

San Francisco (Oct 11)  Gold prices fell on Tuesday, as a stronger dollar and expectations for a U.S. rate increase in coming months put pressure on the precious metal.

Gold for December delivery closed down 0.4% at $1,255.90 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices for the metal are down nearly 5% this month.

Federal Reserve of Chicago President Charles Evans on Tuesday said the U.S. economy is on sound footing and that a December rate increase "could be fine." Investors tend to move out of gold when higher rates are on the horizon, as the metal struggles to compete with interest-bearing investments when borrowing costs rise.

Expectations for a December interest rate increase have heightened in recent days. Fed-funds futures, used to bet on central-bank policy, showed investors and traders assigned a 70.2% likelihood of a rate increase in December, up from around 50% in the middle of last month.

The Fed on Wednesday will release minutes from its September meeting.

"The drying-up of safe-haven demand, the risk of profit-taking and the outlook for a stronger U.S. dollar suggest further pressure on prices," said Norbert Rücker, head of commodities research at Julius Baer, in a note to investors. Gold has risen more than 17% in price since the beginning of the year.

The other precious metals were also down on Tuesday. Silver was off 0.9% at $17.50 a troy ounce, platinum was down 1.6% at $949.80 a troy ounce and palladium was down 3.1% at $648.15 a troy ounce.

Source: WSJ