Gold near one-month low as Yellen signals possible December rate hike

By A. Ananthalakshmi

SINGAPORE (Reuters) - Gold held near a one-month low on Thursday and looked likely to drop below the $1,100-an-ounce level after Federal Reserve Chair Janet Yellen bolstered market expectations for a U.S. interest rate hike in December.

Yellen pointed to a possible December interest rate lift-off and laid out what now appears the base case at the U.S. central bank - that low unemployment, continued growth and faith in a coming return of inflation means the country is ready for higher interest rates.

Another Fed official voiced similar opinions, sending non-interest-paying bullion lower for a sixth straight session on Wednesday.

Spot gold had ticked up 0.2 percent to $1,109.10 an ounce by 0627 GMT, staying close to the previous session's low of $1,106, the weakest since Oct. 2.

Gold is about $30 shy of a 5-1/2-year trough of $1,077 hit in July. It has lost nearly $60 over the past six sessions.

"We think that a December rate hike is more likely than not and an appropriate market reaction is a lightening up of risk, weaker commodities, higher yields and a firmer dollar," ANZ said in a note.

Yellen's remarks caused investors to reset their expectations of a December rate hike above 60 percent. [nS8N10Z00I]

Another top Fed official said on Wednesday that a policy meeting set for Dec. 15-16 is a "live possibility" for raising U.S. interest rates for the first time in nearly a decade.

The dollar rose to a three-month high, along with a jump in U.S. Treasury yields, hurting gold, which tends to benefit from a low interest rate environment.

"Bullion weakened after perceivably hawkish monetary policy comments by ... Yellen," said HSBC analyst James Steel. "The next focus for the gold market may shift to the upcoming release of nonfarm payrolls data on Nov. 6."

A robust U.S. jobs report on Friday could trigger another sell-off in gold, already facing weak technicals and investor outflows.

Assets in SPDR Gold Trust, the top gold-backed exchange-traded fund, fell to 680.11 tonnes on Wednesday - the lowest in six weeks.

"Price action is very bearish, but we expect to find initial support at the October low of $1,105 and the September low of $1,100," ScotiaMocatta analysts said.

(Reporting by A. Ananthalakshmi; Editing by Himani Sarkar and Joseph Radford)