Gold price falls as Fed hike eyed

Frankfurt (Apr 14)  Gold prices in Europe were lower on Tuesday, weighed down by renewed market expectations of a rise in US interest rates in June.

Spot gold was trading down 0.5 per cent at $US1,192.81 a troy ounce in morning trade, having hit a nine-day low earlier in the session at $US1,190.27 an ounce.

According to reports, comments from US Federal Open Market Committee voting officials indicate that an interest rate increase could occur sooner rather than later and "gold prices fell on expectations of a June hike," Phillip Futures investment analyst Howie Lee said.

A rise in US interest rates is likely to strengthen the greenback, which does not bode well for dollar-denominated gold. As gold is priced in dollars, when the dollar firms it makes the yellow metal more expensive to buy for those holding other currencies. This typically results in demand slowing and prices falling.

Looking ahead, the US releases its retail sales figures Tuesday and estimates from market observers are positive.

"However any negative data, leading to a fourth monthly decline for the first time since 2008, would ease speculation of a US rate hike in June," said Nour Al-Hammoury, chief market strategist at Abu Dhabi-based ADS Securities.

All the other precious metals were lower. Silver was down 0.6 per cent at $US16.156 an ounce, having reached a near-four-week low earlier in the session at $US16.093 an ounce. Platinum was down 0.1 per cent at $US1,150.32 an ounce after hitting a nine-day low previously in the day's trading, while palladium was down 0.6 per cent at $US762.79 an ounce.