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PRECIOUS-Gold hits lowest in four months on U.S. rate prospects
October 6, 2016 / 10:26 AM / a year ago

PRECIOUS-Gold hits lowest in four months on U.S. rate prospects

* Friday's U.S. payrolls report in focus
    * Silver and platinum hit more than three-month lows
    * GRAPHIC-2016 asset returns:

 (Recasts, updates prices; adds comment, second byline, NEW YORK
    By Marcy Nicholson and Clara Denina 
    NEW YORK/LONDON, Oct 6 (Reuters) - Gold fell for the eighth
straight session on Thursday, slipping to a four-month low,
pressured by a stronger dollar after U.S. weekly jobless claims
fell and ahead of key data that could put the Federal Reserve on
track to raise interest rates this year.
    Initial claims for state unemployment benefits unexpectedly
declined by 5,000 to a seasonally adjusted 249,000 for the week
to Oct. 1. The U.S. dollar rose to the highest in more
than two months against a basket of currencies as the data
reinforced the view that the Fed would raise rates at the end of
the year.  
    Spot gold fell to $1,250.35 an ounce, its lowest
since June 8 after extending losses below the 200-day moving
average. By 2 p.m. (1800 GMT) it was down 1.2 percent at
    The most active U.S. gold futures for December
delivery settled down 1.2 percent at $1,253 per ounce. 
    Gold's losses dragged the rest of the complex lower. Spot
silver fell 2.4 percent to $17.27 an ounce, after falling
to $17.08, the lowest since June 22. Platinum was down
1.5 percent at $961.25, the lowest since June 24, while
palladium was down 1.6 percent at $665.60, a 3-week low.
    The yellow metal registered its biggest daily drop in three
years on Tuesday and extended losses in the previous session
after forecast-beating U.S. manufacturing data and comments from
Fed officials saying there was a strong case for raising rates.
    "Strong U.S. data and speeches of FOMC members that the Fed
might raise rates before the year is out and then rumors about
the ECB tapering its stimulus ... indicate more downside
pressure in the short term as speculators keep liquidating long
positions," Commerzbank analyst Daniel Briesemann said.
    Markets will now focus on Friday's U.S. non-farm payrolls
report, which is expected to show 175,000 jobs added, according
to the median estimate of 100 economists polled by Reuters. 
    "A surprise on the upside (of the labor numbers) will make
market watchers expect an even higher probability of a rate
hike, and that could bring gold prices down," OCBC Bank analyst
Barnabas Gan said.
    Other data this week showed that U.S. services sector
activity rebounded to an 11-month high in September, prompting
traders to price in close to a 65 percent chance of an interest
rate increase in December. 
    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. 
    "This week, dollar strength materialized on the back of
Brexit comments, hawkish Fed news, and ECB headlines, pushing
gold down; a subsequent wall of technical selling exacerbated
the fall," said RBC Capital Markets in a note, adding that this
began to tear down the wall of investor positioning that built
up this year.
    "Overall, we are still generally bearish on gold as into
2017 we see next year as unable to repeat the perfect storm for
gold that occurred in (the first half of) 2016."

 (Additional reporting by Swati Verma in Bengaluru; Editing by
David Evans and Chizu Nomiyama)

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