Gold slides as upbeat US economic data lift the greenback; oil surges

NEW YORK/LONDON — Gold fell to nearly a 10-month low on Wednesday, adding to its deepest monthly price declines in more than three years as strong US economic data and higher US Treasury yields buoyed the dollar, further cementing the case for a December rate increase.

The US dollar rallied 0.90% against a basket of six major currencies, after oil prices rose sharply and upbeat US economic data and comments by Presidentelect Donald Trump’s choice for US Treasury secretary triggered a sell-off in the bond market.

Spot gold was down 1.20% at $1,174.44 an ounce by 2:40 p.m. EST (1940 GMT), after falling to $1,170.35, the lowest since Feb. 8.

US gold futures settled down 1.40% at $1,170.80 per ounce.

US private employers stepped up hiring in November much more than expected and consumer spending increased last month, giving more ammunition to the Federal Reserve for an interest rate increase.

Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.

“A consensus appears to be growing among Fed voters that the economy requires another rate hike, and today’s Beige Book largely confirmed those opinions,” said Royce Mendes, director and senior economist at CIBC Capital Markets in Toronto.

He added that the Fed was likely to raise rates only gradually next year.

The US economy continued to expand in October and November, the Fed said in its Beige Book report, but wages and prices rose only modestly and the strong dollar weighed on manufacturing.

Gold has shed more than 8% in November, the biggest monthly fall since June 2013.

“Recently there’s been a perfect storm against gold with higher risk appetite, rising stock markets and bond yields, massive ETF ( exchange traded fund) outflows and the withdrawal of speculative financial investors,” said analyst Daniel Briesemann at Commerzbank in Frankfurt.

“Normally lower prices should attract higher demand, but the Indian situation is putting the brakes on gold buying.”

Among other precious metals, silver fell 0.90% to $ 16.44 an ounce while platinum eased 0.80% to $910.20.

Palladium rose 1.10% to $ 768.20. The metal has risen more than 24% this month, its best since February 2008, outperforming other metals. —