February 27, 2018 / 10:20 AM / 8 months ago

PRECIOUS-Gold slides 1 pct after Fed's Powell confirms gradual rate hikes

    * Powell sees more rate increases despite U.S. stimulus 
    * Gold seen falling below $1,300/oz by end of Q1 - analyst

 (Recasts throughout, updates prices, headline, market reaction;
adds comment, NEW YORK to dateline)
    By Renita D. Young and Eric Onstad
    NEW YORK/LONDON, Feb 27 (Reuters) - Gold prices were down 1
percent Tuesday after the new U.S central bank chairman pledged
to stick with gradual interest rate increases.
    Spot gold        was down 1.1 percent at $1,318.22 an ounce
by 1:34 p.m. EST (1834 GMT). Its session low of $1,313.26 was a
two-week low. 
    April U.S. gold futures         settled down $14.20, or 1.1
percent, at $1,318.60 per ounce. 
    The dollar strengthened, pressuring gold, after U.S. Federal
Reserve chief Jerome Powell told U.S. Congress members that rate
hikes should continue despite the added stimulus of tax cuts and
government spending.             
    The current Fed consensus has signaled three to four rate
increases this year.
    "It seemed quite neutral in regards to rates moving
forward," said Bob Haberkorn, senior commodities strategist at
RJO Futures. 
    However some analysts said Powell's tone seemed partially
hawkish. 
    Higher U.S. interest rates make bullion less attractive to
investors since gold does not pay interest. 
    "One thing that surprised some was that he seemed to
directly mention the stock market and recent volatility as
something they’re not concerned about," said Jason Ware, chief
investment officer of Albion Financial in Salt Lake City.
    The dollar index        surged to its highest in more than
two weeks after Powell's remarks. Stock prices fell, while on
the bond market, traders boosted bets the Federal Reserve will
squeeze in a fourth rate hike this year                         
    Some had investors expected Powell to be less hawkish, said
Georgette Boele, commodity strategist at ABN AMRO in Amsterdam.
    "Once they realize that the policy's going to continue like
it has, then the dollar should recover and gold move lower. With
the positioning that's in place, we'll get profit-taking in long
euros and long gold." 
    Boele expects gold to slip under $1,300 an ounce by the end
of the quarter.
    Data showing net gold imports by top-consumer China, via
main conduit Hong Kong surged 65.2 percent in January from the
previous month, supported gold.             
    However data released last week showed imports by No. 2
consumer India fell 22 percent in January.             
    "While we expect India’s gold demand to recover somewhat
this year, we doubt that higher consumption in India and China
will be enough to offset lower investment demand elsewhere as a
result of Fed tightening," commodities economist Simona
Gambarini at Capital Economics said in a note.
    Meanwhile, silver        fell 1.43 percent at $16.42 an
ounce, dipping to $16.32, a two-week low.
    Palladium        lost 2.3 percent at $1,036.97 per ounce
while platinum        fell 1.5 percent at $984.40 hitting near a
two-week low of $976.

 (Additional reporting by Eileen Soreng in Bengaluru; Editing by
Dale Hudson and David Gregorio)
  
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