Federal Reserve officials yesterday continued to flag December as a likely time for interest rates to rise after seven years near zero with two expressing confidence they will be able to pull off a rate hike smoothly despite fears of an abrupt market reaction.
"I'm convinced that the start of the (rate hike) cycle will see relative dollar weakness as investor money flows into other regions and other types of investment away from the US Where the cost of capital and doing business will also grow," said Chief Investment Officer Jonathan Barratt of Ayers Alliance in Sydney. He added that a rate increase could also boost gold's appeal as a hedge against inflation.
Spot gold was up 0.6 percent at USD1,077.20 an ounce by 0216 GMT. Prices fell to 1,064.95 an ounce yesterday, the weakest since early 2010.
US gold had risen 0.8 percent to USD1,077 an ounce. US housing starts in October dropped to a seven month low weighed down by a steep decline in the construction of multi-family homes, but a surge in building permits suggested the housing market remained on solid ground.
The dollar fell back from seven month peaks against a basket of currencies early in Asia today.

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