Gold near one-month low with December rate rise still on table

By Clara Denina

LONDON (Reuters) - Gold held near a one-month low on Thursday as the dollar rose to a three-month high and the metal looked vulnerable to further losses after U.S. Federal Reserve officials left the door open to a rate rise in December.

Fed Chair Janet Yellen said on Wednesday that the United States was ready for higher interest rates if upcoming economic data justified them, pointing to a possible December rise.

William Dudley, president of the New York Fed, said later on Wednesday that December "is a live possibility, but we'll see what the data shows".

"Fed officials want to keep the December rate possibility open and the relation between gold prices and monetary policy expectations is very high," ABN Amro analyst Georgette Boele said.

Spot gold was unchanged on the day at $1,106.96 an ounce by 1056 GMT, not far above the previous session's low of $1,106, its weakest since Oct. 2.

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

"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 expectations of a December rate increase to above 60 percent.

The dollar stayed close to an earlier three-month high, while U.S. Treasury yields also jumped.

As gold pays no interest, the rise in returns from U.S. bonds and other markets is seen as negative for the metal.

"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 non-farm payrolls data on Nov. 6."

A robust U.S. jobs report on Friday could trigger another sell-off in gold, which is 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.

In other precious metals, palladium dropped to a six-week low of $605.97 an ounce. Platinum was down 0.1 percent at $951.50 an ounce and silver was down 0.3 percent at $15 an ounce.

(Additional reporting by A. Ananthalakshmi in Singapore; editing by David Clarke)