Gold bulls brace for more woes as U.S. Federal Reserve set to meet – by Joe Deaux (Bloomberg/Globe and Mail – September 15, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

NEW YORK — Gold bulls can’t shake the spectre of higher U.S. interest rates as Federal Reserve policy makers gather this week.

Prices are trading near a one-month low, investors are dumping holdings through exchange-traded products (ETPs), and the metal’s volatility is rebounding. A resilient U.S. job market and dollar strength are adding to gold’s woes, spurring money managers to cut their bets on a rally by more than a third.

More than $2.6-billion (U.S.) was wiped from the value of gold ETPs in the past three weeks as investors awaited the central bank meeting. While Fed-fund futures show lowered expectations for monetary tightening this week, traders are still pricing in more than a 50 per cent chance for a rate increase by the end of the year. Higher borrowing costs reduce bullion’s allure because it doesn’t pay interest, unlike competing assets such as bonds.

“The likelihood is the Fed moves this year, and for now a tighter Fed and stronger dollar are both keeping a lid on gold,” said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees $127-billion. “When I look at the gold market, that’s the biggest overriding factor.”

December futures added 0.49 per cent to settle Monday at $1,108.20 an ounce on the Comex in New York. Prices slid 1.6 per cent last week.

Speculators cut their net-long position by 36 per cent to 28,286 futures and options in the week ended Sept. 8, according to U.S. Commodity Futures Trading Commission data published three days later. Bearish wagers climbed 18 per cent to 87,815 contracts, the first gain since July 21.

A divergence between gains for the U.S. economy and cooling growth in Asia and Europe means the Bloomberg dollar spot index is heading for a third year of increases, the longest streak since data for the measure begin in 2004.

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