#Gold Slips To Lowest In Nearly 8 Weeks, Hit By US Rate Hike Outlook
Bengaluru: Gold dipped to its lowest in almost eight weeks on Friday and was heading for its biggest weekly decline in nine, with positive economic data boosting expectations that U.S. interest rates will rise in the next two months.
The safe-haven asset was also weighed down by Asian stocks that drifted upwards on Friday and as the dollar index, which measures the greenback against a basket of six major currencies, held steady.
Spot gold had dipped 0.3 per cent to $1,216.50 per ounce by 0333 GMT, after falling as low as $1,211.30 earlier in the session. The metal has dropped about 2.7 per cent so far this week, heading towards its biggest weekly decline since March 25.
U.S. gold was down 0.3 per cent at $1,215.90.
Bullion has been under pressure since the prospect of an imminent rate hike was indicated by U.S. Federal Reserve meeting minutes released last week and has been consistently supported by key central bank officials. An increase in rates would raise the opportunity cost of holding gold.
“Gold is not an interest bearing asset so that is the reason a majority (traders) might want to wait on the sidelines, or, even move out of gold at the moment,” said Brian Lan, managing director at Singapore-based gold dealer GoldSilver Central.
“Some traders might just exit the market for now and see where it goes before they come back in.”
Fed Governor Jerome Powell, a voting member of the U.S. central bank’s rate-setting committee, on Thursday said he felt the economy was on a “solid footing” and within reach of the Fed’s inflation goals.
Meanwhile, the Atlanta Fed on Thursday predicted the country’s economy is on track to grow by a 2.9 per cent annualized rate in the second quarter, following the latest data on durable goods orders and advance goods trade.
The gold market is awaiting further direction from Fed Chair Janet Yellen’s comments at a panel event hosted by Harvard University on Friday.
“If she (Yellen) nudges expectations towards a rate increase, the futures fund curve should start to show a higher probability of an imminent move,” said INTL FCStone analyst Edward Meir.
“At this point, the dollar could start to stabilize and perhaps weaken given that a rate hike would now be mostly discounted.”
Among other precious metals, spot silver touched its lowest since April 18, hitting a low of $16.12. Spot platinum marked its weakest in over a month and was on track for its biggest weekly decline since Jan 15.