Gold edged lower on Monday, trading near a 5-1/2-year low, as expectations for a close-term rise in US interest rates spurred selling even bullion dropped the most since July. The rout of gold deepened as the US dollar strengthened after positive US economic data and opinions by the Federal Reserve indicated the US central bank is on course to increase interest rates for the very first time in nine years.
That rate increase could come as early as September, presenting more negative risk for non-interest generating gold. Area gold was down 0.1 percent at $1,093.90 an oz by 0237 GMT. The metal dropped as low as $1,079.50 on Friday, near last month's trough of $1,077, its weakest since February 2010. Bullion lost nearly 7 percent in July, its deepest monthly drop since June 2013. It dropped for a sixth straight week last week, its longest escape since 1999.
Investors are eyeing the following monthly U.S. nonfarm payrolls report on Friday, and a powerful print could mean additional weakness for gold, said Gan. US gold for December delivery fell 0.1 percent to $1,093.60 an oz. Cash managers and hedge funds kept their first bearish position in COMEX gold in a decade during the week ended July 28, indicating the recent mass exodus from bullion was more than a knee-jerk reaction. There's not likely to be powerful technical support for gold until it reaches the February 2010 low of around $1,044, said INTL FCStone analyst Edward Meir, who anticipates the metal to trade between $1,050 through and $1, this month.
Amid waning interest in bullion, holdings in SPDR Gold Trust , the world's biggest gold-backed exchange-traded fund, fell again, to 21.63 million oz on Friday, the lowest since September 2008. Area platinum fell 0.4 percent and palladium increased 0.5 percent, with both not far off multi-year lows. INTL FCStone's Meir anticipates continuing weakness in August on more sluggish Chinese auto sales and South African supply. Spot silver facilitated 0.2 percent to $14.74 an oz.