Gold drops from 3-month high on profit-taking

Gold fell nearly 1 per cent on Tuesday, retreating from a three-month high on profit-taking after a two-day rally triggered by expectations the Federal Reserve will not hike US interest rates this year.

Spot gold fell 0.8 per cent to $1,154.15 an ounce by 0323 GMT, after earlier dropping as much as 0.9 per cent. The metal hit a three-month high of $1,169 in the previous session. US gold futures fell 1 per cent to $1,152.

“It has been an impressive rally for the precious complex since the non-farm payrolls 10 days ago, however it looks like the momentum is now starting to wane,’’ said James Gardiner, a bullion trader with MKS Group.

“Overnight weakness in the oil price may also flow through the commodity complex and put additional pressure on precious metals and a bid on the dollar,’’ he said.

A stronger dollar would make gold expensive for the holders of other currencies.

US non-farm payrolls data

Bullion has gained $50 an ounce or nearly 5 per cent, since a surprisingly weak US non-farm payrolls report on October 2. The data prompted the market to shift expectations of a Fed rate hike to 2016 and sell the dollar. Gold, as a non-interest-paying asset, benefits from ultra-low interest rates.

However, comments from Fed officials signalling that the US central bank was in no hurry to raise rates did not offset the profit-taking on Tuesday.

Go-slow approach

The Fed should hold off on any rate hike until it is clear that a global slowdown, trouble in China and other international risks will not push the US recovery off course, Fed Governor Lael Brainard had said on Monday in one of the strongest defences yet of a go-slow approach to rate policy.

The Fed refrained from hiking rates at its last meeting in September, citing concerns with the global economy and volatility in financial markets. It holds two more policy meetings in 2015: on October 27-28, and then in December.

Among other precious metals, silver fell as much as 1.2 per cent, after hitting a 3-1/2-month high of $16.10 last week. Platinum fell 1.6 per cent, dropping from a one-month high of $998.50 an ounce in the previous session. Palladium also eased.