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PRECIOUS-Gold hits 4-week low as U.S. rate hike outlook weighs
May 24, 2016 / 6:06 PM / a year ago

PRECIOUS-Gold hits 4-week low as U.S. rate hike outlook weighs

* Hawkish comments from Fed fuel talk of near-term rate hike
    * Dollar rises to two-month high vs currency basket
    * Silver, platinum, palladium at multi-week lows
    * GRAPHIC-2016 asset returns: reut.rs/1WAiOSC

 (Updates prices; adds comment, byline, NEW YORK dateline)
    By Marcy Nicholson and Jan Harvey
    NEW YORK/LONDON, May 24 (Reuters) - Gold fell to the lowest
in more than four weeks on Tuesday as hawkish comments from
Federal Reserve officials in the previous session sent the
dollar to a two-month high against a currency basket.
    The prospect of an early rate hike, as indicated by Fed
meeting minutes released last week, and a strengthening dollar
have pushed gold down more than 4 percent so far in May, putting
it on track for its biggest monthly decline since November.
    Gold is highly sensitive to rising interest rates, which
lift the opportunity cost of holding the non-yielding metal,
while boosting the dollar, in which it is priced. 
    Spot gold was down 1.5 percent at $1,229.25 an ounce
at 1:55 p.m. EDT (1755 GMT), off an earlier low of $1,227.70.
U.S. gold futures for June delivery settled down 1.8
percent at $1,229.20 an ounce.  
    "What we're seeing is a lot of things that would mean higher
rates coming together," Oxford Economics analyst Daniel Smith
said. 
    "The U.S. economy is actually doing reasonably well... and
with higher oil prices and a tightening U.S. labor market,
everything's starting to come together to (suggest) it would be
sooner rather than later."
    Senior Fed officials on Monday said that rates being kept
too low for too long could cause financial instability, and that
the U.S. central bank would continue with rate increases next
year.   
    More Fed policymakers are scheduled to speak this week and
are expected to back the case for a rate hike within months. Fed
Chair Janet Yellen will be at a panel event hosted by Harvard
University on Friday. 
    "We had more hawkish noises yesterday, with a trio of Fed
speakers lining up to say that June or July are live meetings
for considering a rate increase," Societe Generale analyst Robin
Bhar said. 
    ABN Amro views gold's price set-back as temporary.
    "We expect U.S. real yields (taking into account inflation
expectations) to peak and to move lower," said ABN Amro analyst
Georgette Boele, in a report.
    "This will make gold as, an asset, attractive."
    Holdings in the world's largest gold-backed exchange-traded
fund, SPDR Gold Shares, rose 0.38 percent to 872.52 tonnes
on Monday. 
    Meanwhile, silver fell as much as 1 percent to $16.19
an ounce, its lowest since April 19. Spot platinum fell
as much as 1.1 percent to $995 an ounce, its lowest since April
25. 
    Palladium dropped 2.6 percent to $534 an ounce, the
weakest since April 14.

    
 (Additional reporting by Vijaykumar Vedala and Koustav Samanta
in Bengaluru; Editing by Adrian Croft and Alan Crosby)

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