Gold Weakens as Market Weighs European Banking Woes, Fed Rate Expectations
01 October 2016 - 5:51AM
Dow Jones News
By Ira Iosebashvili
Gold prices fell on Friday, after shuffling between gains and
losses as investors weighed concern about Europe's banking woes
against heightened expectations of a Fed rate increase in
December.
Gold for December delivery closed down 0.7% at $1,317.10 a troy
ounce on the Comex division of the New York Mercantile Exchange.
Prices were as high as $1,331.50 a troy ounce earlier in the
session.
European markets were rattled on Friday over mounting worry over
Deutsche Bank, Germany's largest financial institution, including
reports that some hedge funds had moved to pull their own funds
from the bank. That benefited gold, which some investors buy in
times of political or economic uncertainty, believing it will hold
its value better than other assets.
As the session wore on, the focus turned to increasing
expectations that the U.S. Federal Reserve will raise rates by the
end of the year. Fed-funds futures, used to bet on central-bank
policy, showed investors assigned a 61.6% likelihood to a rate
increase in December, up from 52% the previous day, according to
CME data on Friday.
Expectations for higher rates tend to weigh on gold, which
yields nothing and struggles to compete with Treasurys and other
investments when borrowing costs rise.
As a result, "bullion looks a little sluggish," analysts at HSBC
wrote in a note to clients. "The market may have to edge lower
before it finds firm support."
--Katherine Dunn contributed to this article
Write to Ira Iosebashvili at ira.iosebashvili@wsj.com
(END) Dow Jones Newswires
September 30, 2016 15:36 ET (19:36 GMT)
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