Gold falls as risk grows for higher rates

Gold came under pressure on Thursday from waning investor appetite for the metal and growing expectations for rising interest rates that would ultimately make it less attractive to invest in this market. A raft of positive economic data from the United States and more hawkish signals from some other central bank officials have also sparked speculation that certain major economies would move to raise interest rates sooner than previously thought.
The European Central Bank's Lorenzo Bini Smaghi said sharper rises in imported goods' prices carry an inflationary threat that could no longer be ignored, reinforcing the view that the ECB could raise rates sooner than expected. Gold tends to underperform when rates are rising as the opportunity cost - the premium investors forfeit by not buying a yield-bearing product - increases.
Spot gold was bid at $1,332.30 an ounce at 1350 GMT, against $1,346.36 late in New York on Wednesday. US gold futures for February delivery was flat at $1,332.80. The euro touched two-month highs against the dollar after Bini Smaghi's comments and its highest in two months against the yen after ratings agency Standard & Poor's downgraded Japan's sovereign debt.
"There is a lot of safe-haven money coming out of gold at this point. Generally, the macro data has been quite positive, particularly for the US ... and of course there is a lot more confidence around Europe as well," said Standard Chartered analyst Daniel Smith. Holdings of gold in the SPDR Gold Trust, the world's largest gold-backed exchange traded fund, were unchanged after recording their biggest ever one-day fall on Tuesday.
ETF Securities' London-listed gold fund saw outflows worth nearly 65,000 ounces on Thursday and has seen metal leave the fund every week since the start of the year. The Federal Reserve on Wednesday left US interest rates unchanged and reiterated its commitment to its $600-billion bond-buying programme. While it acknowledged economic data has improved, the Fed said the pace of growth had not been enough to generate healthy job creation.
Among other precious metals, silver was bid at $27.46 an ounce against $27.59. Data showed holdings in the largest silver ETF, the iShares Silver Trust, fell to 10,447.70 tonnes on Wednesday from 10,478.08 tonnes.
ETF selling has helped pressure silver prices more than 11 percent so far this month, taking the gold:silver ratio - the number of silver ounces needed to buy an ounce of gold - to its highest since late November this month. "The ratio has been firm this month, moving up from 46.00," said technical analysts at ScotiaMocatta in a daily note. "It will be interesting to see if the 50.00 level proves a barrier to future gains." Platinum was at $1,799.49 an ounce against $1,810.50, while palladium was at $809.72 against $812.50.