By Katherine Dunn

Gold prices fell near a 10-month low Wednesday as a stronger dollar and expectations of an interest-rate increase by the Federal Reserve in December put pressure on the metal.

Gold for February delivery, the most active contract, settled down 1.4% at $1,173.90 a troy ounce on the Comex division of the New York Mercantile Exchange, the lowest close since Feb. 5.

The WSJ Dollar Index, which weighs the dollar against a basket of other currencies, was up 0.6% on Wednesday. A stronger dollar is typically bearish for dollar-denominated commodities.

Investors are also in near consensus the Fed will raise rates at a meeting in December. The likelihood of a rate increase is now almost 99%, according to Fed fund futures tracked by CME Group. Because gold doesn't bear interest, it struggles to compete when interest rates rise.

"[Gold is] going to be quite weak going into the December meeting," said Nitesh Shah, commodities strategist at ETF Securities in London.

Investors are also looking ahead to the Italian referendum Sunday, when the country will head to the polls to vote on a constitutional overhaul. A "no" vote could be a sign of further political uncertainty and push gold prices up in the short term, Mr. Shah said.

Meanwhile, gold demand in India, one of the largest buyers of the physical metal, is falling short, with gold traders saying imports could fall to a combined 60-70 tons over the next two months, according to Commerzbank AG.

"So far, it would appear that the low gold prices are failing to attract buyers," the bank said. "On the contrary, gold demand in India is even expected to decline sharply over the next few months."

A program by the Indian government to force people to trade in higher-denomination bank notes, to track untaxed cash, initially stoked gold buying. But the crunch has now delayed weddings in the country, which are one of the main occasions for purchasing gold, Commerzbank said.

On Wednesday, mining giant Anglo Asian Mining PLC also announced it had lowered its 2016 gold production target by 2,000 ounces, to a range of 67,000 to 69,000 ounces, because of changes at its mine in Azerbaijan.

Investors will be waiting for Friday's release of the U.S. nonfarm payrolls figures for November, which could affect the strength of the dollar.

Stephanie Yang contributed to this article.

Write to Katherine Dunn at Katherine.Dunn@wsj.com

(END) Dow Jones Newswires

November 30, 2016 15:40 ET (20:40 GMT)

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