Gold declines from three-month high amid U.S. growth signs

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(Bloomberg) -- Gold dropped for a third day as signs of a buoyant U.S. economy revived expectations that the Federal Reserve may raise interest rates and data showed that China expanded quicker than economists forecast in the third quarter.

Bullion for immediate delivery declined as much as 0.5 percent to $1,171.38 an ounce and was $1,173.32 at 2:58 p.m. in Singapore, according to Bloomberg generic pricing. The metal rose to $1,191.67 on Thursday, the highest level since June to briefly erase its loss for the year.

Gold had staged a comeback through to last week as concern mounted over the outlook for global growth, reducing the outlook for a rate increase. A private report on Friday showed U.S. consumer sentiment rose more than forecast this month and the day before government data showed jobless claims unexpectedly slid to match the fewest in four decades. The dollar was little changed Monday, holding two days of gains.

“We had some strong U.S. data on Friday, which is seeing the gold market trade a little bit lower,” said Victor Thianpiriya, a Singapore-based analyst at Australia & New Zealand Banking Group Ltd.

Rates Outlook

Fed-fund futures show a 32 percent chance of a rate increase in December, up from 27 percent on Wednesday. Higher rates curb the appeal of bullion because it doesn’t pay interest, unlike competing assets. Holdings in physically backed ETPs increased 8.26 metric tons last week, data compiled by Bloomberg show.

Gold could be exposed to a downward correction if pessimism over a Fed move proves to be unfounded, Citigroup Inc. analysts including Jon H. Bergtheil, wrote in a report on Monday.

China’s gross domestic product rose 6.9 percent, beating economists’ estimates, according to figures on Monday. Prices in Shanghai were trading at about parity with London, compared with a premium of $2 an ounce last Monday, Thianpiriya said.

“Demand was pretty strong through September, but we saw shipments fall a fair bit in October,” said Thianpiriya. “Flat- to-negative premiums are consistent with ample supply onshore and prices have been a bit higher, so not too surprising that we’re seeing premiums come off.”

Silver for immediate delivery lost 0.9 percent to $15.9075 an ounce, and platinum and palladium also fell.