Gold sheds three-week highs on fresh interests worries

Gold pulled back from a three-week high on Wednesday, on the back of fresh concerns over an interest rate hike and overall strength in the US dollar.

December bullion was recently down 0.62% at $1,265.20 an ounce on the Comex division of the New York Mercantile Exchange.

Investors are cautiously looking at the US Federal Reserve meeting next week, in which it's expected to announce a raise in rates.

Gold sheds three-week highs on fresh interests worries

Source: Kitco Live Charts.

What has become a rule of thumb for some participants on the gold market is that rising interest rates means a declining gold price. Higher yields increase the opportunity costs of holding gold because the metal provides no income.

Since the global financial crisis the inverse relationship between interest rate expectations and the gold price has only become tighter with some analysts believing it can serve as an early warning system of both the direction and magnitude of the move in rates.

The precious metal has recently benefited from signs of strengthening demand as the beginning of Diwali, the Indian festival of lights, comes closer.

In the past few years gold prices have risen around the festivity, during which the yellow metal is given and received as gift.