Gold heads for weekly decline before Fed meets

Traders pricing in 76% probability that US interest rates will be increased

Gold headed for a weekly retreat as the Federal Reserve prepares to raise borrowing costs in the world’s largest economy as soon as this week.

Traders are pricing in 76 per cent probability that interest rates will be increased for the first time since 2006 at the Federal Open Market Committee meeting on December 15-16, potentially hurting gold as the dollar strengthens.

The Bloomberg Dollar Spot Index, a gauge against 10 other currencies, rose for a second day.

“Everybody is fixated on the interest-rate decision next week,” Mark O’Byrne, executive director of Dublin-based brokerage GoldCore Ltd, said by phone. “That’s the primary focus and that’s leading to a weakness. Technically gold looks very vulnerable.”

Bullion for immediate delivery fell 0.5 per cent to $1,065.88 an ounce by 11.49am in London, according to Bloomberg generic pricing. The metal has dropped 1.9 per cent this week and is headed for a third straight annual loss this year.

Gold will probably climb in 2016 with wheat and natural gas, a Bloomberg survey of 108 traders, analysts, economists and strategists across Asia, Europe and the Americas shows.

Assets in gold-backed exchange-traded products expanded for a third day to 1,465.46 metric tonnes as of Thursday, according to data compiled by Bloomberg.