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Gold holds near 3-week low as Fed rate hike views lift dollar

Spot gold was down 0.2 per cent at $1,254.36 per ounce, as of 0717 GMT

Gulf News

BENGALURU: Gold prices on Wednesday hovered near a three-week low hit in the previous session as the dollar firmed on expectations that the US Federal Reserve may raise rates in June.

Spot gold was down 0.2 per cent at $1,254.36 per ounce, as of 0717 GMT. Bullion on Tuesday hit $1,251.37 per ounce, its lowest since April 10.

US gold futures fell 0.1 per cent to $1,255.40 an ounce.

The dollar traded below a six-week high against the yen, while the dollar index, in which gold is priced, was up 0.1 per cent at 99.058.

“The Fed meeting is the next likely catalyst for gold. There is a good chance that gold will stay rangebound around $1,245-$1,265 for sometime unless the markets take a major lead out of the meeting,” said Jordan Eliseo, Chief Economist with ABC Bullion, Australia.

“Global tensions regarding North Korea has dissipated a bit and that’s why we have seen a pull back in prices, which has been a healthy one as the markets looked a bit over extended,” Eliseo said.

Asian stocks were mixed on Wednesday, moderating after earlier strong gains on positive global earnings and manufacturing data.

“The yellow metal is finding it difficult to move away from $1,250 amid firming global equity markets,” said Sam Laughlin, senior precious metals trader, MKS PAMP Group.

“Should we see any surprises from the Fed to push gold below the 200-day moving average, expect the next target on the down-side to sit around $1,230 — $1,235, however, risks surrounding the upcoming French election should temper declines.” Spot gold may retest a support at $1,249 per ounce, with a good chance of breaking below this level and falling to the next support at $1,228, according to Reuters technical analyst Wang Tao.

“If the Fed mirrors the stance of what other central banks have been doing over the past week and tacks to a more accommodative stance, we could see gold experience something of a bounce,” INTL FCStone analyst Edward Meir said.

Higher rates would reduce demand for non-interest bearing gold and would also make the dollar-denominated metal more expensive for buyers paying with other currencies.

Silver edged up 0.2 per cent to $16.82 per ounce, after hitting a three-month low in the previous session.

Platinum dropped 0.5 per cent to hit a four-month low of $917.95.

Palladium rose 0.5 per cent to $818.72 per ounce.