Gold fell on Monday as the dollar edged higher ahead of a Federal Reserve policy meeting this week, which is expected to announce the first interest rate rise in nearly a decade. Investors have been cutting gold positions in anticipation of a rate increase and the metal has fallen about 9 percent so far this year. Higher rates could dent demand for the non-interest paying asset, while also boosting the dollar. Spot gold eased 0.4 percent to $1,069.85 an ounce by 1458 GMT, while US gold futures were down 0.5 percent at $1,070.10 an ounce.
"Gold's downtrend persists, with initial support around $1,062-$1,063, a break of which could see prices back to their December lows (at $1,045)," ActivTrades chief analyst Carlo Alberto de Casa said. Silver hit its lowest since August 2009 at $13.60 an ounce. "US rates are going to move somewhat higher, the overall environment is still one of sound growth in the States, there is no inflation on the horizon at all, so from that prospective you don't need any gold," Julius Baer analyst Carsten Menke said.
"We see prices moving sideways between $1,000 and $1,100 next year." The dollar rose 0.1 percent against a basket of leading currencies, making dollar-denominated gold more expensive for foreign investors. A 4 percent drop in oil prices towards 11-year lows also hurt bullion, which is seen as a hedge against oil-led inflation. Investors will soon be focusing on the pace of the Fed's tightening cycle and how quickly it will try to normalise monetary policy, analysts said.
Assets in the top gold ETF, SPDR Gold Trust, are at their lowest since September 2008 while speculators' short positions in gold are near record highs. Hedge funds and money managers reduced their bearish stance in COMEX gold in the week to December 8 as prices rallied modestly, US Commodity Futures Trading Commission data showed on Friday. BofA Merrill Lynch said on Friday it expected the gold price to slide to $950 early in 2016 due to the upcoming US rate rise, joining a chorus of other brokerages, including Goldman Sachs, predicting a drop to, or below, $1,000. Options traders are also boosting their bets that gold will soon hit $1,000 an ounce, data last week showed. Physical demand from the world's biggest consumer India was also lacking. Gold prices in India swung to a discount for the first time in a month on Monday. Palladium rose 0.8 percent to $546.65 an ounce, while platinum was up 1.4 percent at $851 an ounce.
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