(Bloomberg) -- Gold posted the biggest monthly drop since 2013 and investors continued to pull out of funds linked to the metal on expectations that the Federal Reserve will raise interest rates next month. Palladium gained in its best month in more than eight years.
A report Wednesday showed companies in the U.S. created more jobs than expected, underscoring an improving labor market two days before the government's November employment report is due. Holdings in exchange-traded funds backed by bullion have contracted 5.3 percent in this month, the most since June 2013.
Gold has been battered as the dollar's surge to the highest in at least a decade and signs that the Fed is moving closer to increasing rates reduce the metal's appeal as a store of value. Assets in bullion-backed ETFs fell for a 13th straight day as of Tuesday, the longest stretch in almost a year.
“The whole deal is rate hikes and dollar strength, and that's weakening the gold market,” said Phil Streible, a senior market strategist at RJO Futures in Chicago. “Friday's jobs report could come out very stellar. We could see more than two rate hikes next year.”
Gold futures for February delivery fell 1.4 percent to $1,173.90 an ounce at 1:42 p.m. on the Comex in New York. The metal has dropped more than 8 percent this month. It fell below $1,200 last week for the first time since February.
“It's the old story of a rising dollar and interest-rate expectations being poisonous for gold,” said Thorsten Proettel, a commodity analyst at Landesbank Baden-Wuerttemberg in Stuttgart, Germany.
The results of an Italian referendum on constitutional reform this weekend could inject fresh volatility into the gold market, Proettel said.
In other metals:
- Palladium continued its advance, with futures for March delivery adding 1 percent to $772.65 an ounce on the New York Mercantile Exchange. The metal rallied 25 percent in November, the most since 2008.
- Platinum futures slipped on the Nymex, and silver fell on the Comex.
- READ:: Battered Gold Seen at Risk of Further Tumble on Rates, Dollar
- READ: Rout Is on for Gold ETFs as ‘Fiscal Largess' Outlook Saps Havens
--With assistance from Eddie van der Walt To contact the reporters on this story: Ranjeetha Pakiam in Singapore at rpakiam@bloomberg.net, Susanne Barton in New York at swalker33@bloomberg.net. To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net, Joe Richter
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