Gold eyes fourth weekly loss as investors count on Fed rate rise

By Jan Harvey

LONDON (Reuters) - Gold fell back towards near six-year lows on Friday, staying on track for a fourth straight weekly loss, on expectations the Federal Reserve is set to raise U.S. interest rates next month for the first time in nearly a decade.

A raft of Fed officials lined up behind a December rate rise on Thursday, with one central banker saying the risk of waiting too long was now roughly in balance with the risk of moving too soon to normalise rates after seven years near zero.

Spot gold was at $1,082.50 an ounce at 1500 GMT, down 0.2 percent, having touched its lowest since February 2010 on Thursday at $1,074.26. U.S. gold futures for December delivery were down 10 cents an ounce at $1,080.90.

Rising rates tend to weigh on gold, as they lift the opportunity cost of holding non-yielding assets, while boosting the dollar. Gold has fallen more than 5 percent since the start of November, when a stronger than expected U.S. payrolls report fuelled expectations for a near-term rate hike.

"Quite clearly, with the growing sense that there will be a December rate hike after the strong U.S. data last week, investors have been bailing out of gold," Citi analyst David Wilson said. "I suspect that is likely to continue."

Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, fell by another 1.5 tonnes on Thursday. The fund has seen outflows of more than 30 tonnes so far in November, the first monthly decline in its holdings since July.

The platinum group metals also came under pressure from fund selling. Holdings of platinum ETFs are at a two-year low, while assets of palladium funds are at their lowest since April 2014.

"This additional near-term supply from ETFs and other liquidation took platinum to seven-year lows and undermined palladium also," HSBC said in a note.

"While we find physical demand for the PGMs from industrial sources to be broadly steady, investors are retreating and we see no early signs of further production restraint."

Platinum was at $862 an ounce, down 1.4 percent, having earlier slid to its lowest since December 2008 at $859.

Palladium was down 3.4 percent at $539.72 an ounce after touching a 2-1/2 month low of $530.75. Prices of the autocatalyst metal are down more than 12 percent this week, its biggest weekly decline since late 2011.

Silver was down 0.6 percent at $14.18 an ounce, off an earlier 2-1/2 month low at $14.15.

(Additional reporting by A. Ananthalakshmi in Singapore, Editing by David Evans and Mark Potter)