Gold fell nearly one percent on Monday, heading back towards last week's near six-year low, on a robust dollar and upbeat comments from Federal Reserve officials on a possible US rate hike next month. Spot gold was 0.7 percent lower at $1,070.33 an ounce by 1528 GMT, down for a 13th of the 16 trading days so far this month. The metal $1,064.95 last week, the lowest since February 2010.
The dollar rose 0.2 percent against a basket of six major currencies. The euro fell on expectations that the European Central Bank will ramp up its monetary stimulus next month and could fall toward parity with the dollar in the months ahead as the Federal Reserve begins to lift interest rates while the ECB takes the opposite course. A strong US currency makes dollar-denominated gold more expensive for foreign holders.
Speculation that the Fed will lift interest rates in December for the first time in nearly a decade has intensified since the release of strong US jobs data earlier this month. Comments from Fed officials have bolstered that view. As well as boosting the dollar, higher US interest rates increase the opportunity cost of holding non-yielding assets such as gold. "I wouldn't be surprised to see prices fall below $1,000 as expectations of a rate hike affect sentiment," Natixis analyst Bernard Dahdah said.
"There have been substantial outflows from ETFs and central bank demand only shows additions from gold-producing countries, so generally speaking fundamental demand isn't really there to support prices." Assets in SPDR Gold Trust, the world's top gold-backed exchange-traded fund (ETF), slid 0.18 percent to 660.75 tonnes on Friday, the lowest since September 2008. Hedge funds and money managers switched to a bearish position in COMEX gold contracts in the shortened week to November 17, as prices fell to the lowest in nearly six years, US Commodity Futures Trading Commission data showed on Friday.
"The dollar is strong, short-term interest rates are rising, but the nervousness about going short is that everyone knows that's bad for gold and how much of it is priced in," Macquarie analyst Matthew Turner said. There is a "strong case" for raising interest rates when Fed policymakers meet next month, as long as US economic data does not disappoint, San Francisco Fed President John Williams said on Saturday. Other precious metals also tracked gold lower, with platinum hitting a seven-year low of $839.50 an ounce on worries about demand. Silver tumbled to $13.86 an ounce, the lowest since August 2009, while palladium fell 2.8 percent to $543.85 an ounce.