Gold price drops with euro as US signals rate hike this year

July 13, 2015

Washington (July 13)  Gold slipped Monday as signals the US Federal Reserve remained on track to raise interest rates later this year dragged on prices.

Greece will now be required to push legislation through parliament this week to convince its eurozone creditors to release funds to avert a state bankruptcy and start negotiations on a third bailout program estimated at up to 86 billion euros ($95.5 billion).

The news weighed on the euro, making dollar-denominated assets such as gold more costly for holders of other currencies.

Spot gold was off 0.3 percent at $1,159.90 an ounce by 0604 GMT, after falling for a third straight week.

Also a drag on gold were signals Friday from Federal Reserve Chair Janet Yellen suggesting the US central bank is on course to raise interest rates within this year. Expectations that the Fed would lift interest rates at some point this year have weighed on bullion prices, which touched a four-month low last week. It has been largely on a decline since hitting a high of $1,232 in mid-May.

"We are bearish toward gold prices and the underlining factor for this is our expectation that the Fed will raise interest rates by the third quarter," said OCBC Bank analyst Barnabas Gan.

Gan said the Fed rate hikes could be a "minimum of one, maximum of two" this year, depending on how the US labor market fares.

Yellen said that while the US economy should grow steadily for the remainder of the year, allowing the Fed to move with its first rate hike in nearly a decade, she stressed that US labor markets remain weak and that more workers could be encouraged back into the job market with stronger growth.


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