Gold near one-month low as Yellen signals possible December rate hike

Spot gold had ticked up 0.2 per cent to $1,109.10 an ounce

Mumbai

: Gold held near a one-month low on Thursday and looked likely to drop below the $1,100-an-ounce level after Federal Reserve Chair Janet Yellen bolstered market expectations for a U.S. interest rate hike in December.

Yellen pointed to a possible December interest rate lift-off and laid out what now appears the base case at the U.S. central bank—that low unemployment, continued growth and faith in a coming return of inflation means the country is ready for higher interest rates.

Another Fed official voiced similar opinions, sending non-interest-paying bullion lower for a sixth straight session on Wednesday.

Spot gold had ticked up 0.2 per cent to $1,109.10 an ounce by 0627 GMT, staying close to the previous session's low of $1,106, the weakest since Oct 2.

Gold is about $30 shy of a 5-1/2-year trough of $1,077 hit in July. It has lost nearly $60 over the past six sessions.

-"We think that a December rate hike is more likely than not and an appropriate market reaction is a lightening up of risk, weaker commodities, higher yields and a firmer dollar,-" ANZ said in a note.

Yellen's remarks caused investors to reset their expectations of a December rate hike above 60 per cent.

Another top Fed official said on Wednesday that a policy meeting set for Dec. 15-16 is a -"live possibility-" for raising U.S. interest rates for the first time in nearly a decade.

The dollar rose to a three-month high, along with a jump in U.S. Treasury yields, hurting gold, which tends to benefit from a low interest rate environment.

-"Bullion weakened after perceivably hawkish monetary policy comments by ... Yellen,-" said HSBC analyst James Steel. -"The next focus for the gold market may shift to the upcoming release of non-farm payrolls data on Nov. 6.-"

A robust U.S. jobs report on Friday could trigger another sell-off in gold, already facing weak technicals and investor outflows.

Assets in SPDR Gold Trust, the top gold-backed exchange-traded fund, fell to 680.11 tonnes on Wednesday - the lowest in six weeks.

-"Price action is very bearish, but we expect to find initial support at the October low of $1,105 and the September low of $1,100,-" Scotia Mocatta analysts said.