Gold falls, outlook for higher rates cuts demand

Singapore - Gold declined for a third day on expectations the Federal Reserve will raise interest rates this year. Platinum extended its drop to the lowest since 2008.

The Fed will probably lift rates later this year and tighten policy gradually thereafter, New York Fed President William C. Dudley said on Monday, echoing the sentiment of chair Janet Yellen that an uncertain global outlook won’t postpone increases into 2016.

Higher borrowing costs curb the appeal of bullion, which doesn’t pay interest or give returns like other assets such as bonds and equities.

“People have no interest in putting money into gold at this particular moment in time because they just see no reward,” David Govett, head of precious metals at broker Marex Spectron Group in London, said by phone. “Unless there is some awful catastrophe, gold is no longer viewed as a safe haven.”

Bullion for immediate delivery fell 0.5% to $1 126.34 an ounce by 13:01, according to Bloomberg generic pricing. Prices, in the longest run of daily declines in three weeks, are heading for a fifth quarterly loss. That’s the longest run since 1997.

Gold equities also fell. AngloGold Ashanti [JSE:ANG], the third- biggest producer, dropped as much as 4.8% in Johannesburg to the lowest in almost two weeks. Sibanye Gold [JSE:SGL] slipped 4.9% while Randgold Resources [JSE:RNG] retreated 0.8% in London.

Silver was little changed at $14.584 an ounce in London. Palladium climbed 0.5% to $651 an ounce. Platinum retreated 0.7% to $912 an ounce after touching the lowest since December 2008. The metal is trading at a discount of about $214 to gold, the most in three years.

“It is a big, big discount,” Marex’s Govett said. Some investors who had been betting on platinum outperforming gold are now exiting that trade, he said.

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