Gold price slips as housing data bolsters case for US rate rise
San Francisco (Aug 18) Gold futures dropped for the third time in four sessions as a jump in US new-home construction boosted the case for the Federal Reserve to raise interest rates next month.
Housing starts climbed in July to the highest in almost eight years, government data showed Tuesday, indicating the industry will pick up in the second half of the year. The dollar rose as much as 0.2 per cent against a basket of 10 currencies, reducing demand for bullion as an alternative asset.
The metal fell to a five-year low in July as an improving US economy boosted speculation that the central bank will soon raise rates, which diminishes gold's appeal because it doesn't pay interest. Investors will be looking on Wednesday at minutes from the Fed's last meeting for further clues on the timing and pace of tightening in monetary policy.
"Gold will keep reacting to the US data, and today's housing numbers gave a boost to the dollar and pushed gold down," Miguel Perez-Santalla, a sales and marketing manager at Heraeus Metals New York, said in a telephone interview. "Gold will remain under pressure because concerns about a September hike remain."
Gold futures for December delivery slid 0.1 per cent to settle at $US1116.90 an ounce at 1.45pm on the Comex in New York. On Monday, gold advanced 0.5 per cent after a drop in a Fed manufacturing gauge eased rate concerns.
Investor holdings in exchange-traded products backed by gold have posted three straight monthly declines, and bullion has fallen 5.7 per cent this year. Prices will drop to $US984 before January, according to the average estimate in a Bloomberg survey of 16 analysts and traders late last month.
Silver futures for September delivery retreated 3.3 per cent to $US14.79 an ounce, the biggest drop for a most-active contract since July 7.
Platinum futures for October delivery dropped 0.7 per cent to $US994.10 an ounce on the New York Mercantile Exchange. Palladium futures for September delivery slumped 2.7 per cent to $US597 an ounce, the biggest drop since July 7