Gold at three-week low on firmer dollar, U.S. jobs data
New York (June 15) Gold fell to a three-week low on Thursday, weighed down by a stronger dollar as investors began to assess the potential for another U.S. rate hike later in the year, supported by data showing a strong U.S. jobs market.
The losses in gold were limited, however, with bullion underpinned by myriad global uncertainties, including a report that U.S. President Donald Trump was under investigation.
"Just like in previous rate hikes, the next day the market starts looking at the probability of the next hike because everything was factored in beforehand," Natixis metals analyst Bernard Dahdah said.
The U.S. Federal Reserve raised interest rates by a notch as expected on Wednesday and indicated further tightening before the end of the year.
Spot gold fell 0.5 percent to $1,254.05 an ounce by 2:56 p.m. EDT (1856 GMT), after touching $1,251.18, the weakest since May 24.
U.S. gold futures for August delivery settled down 1.7 percent at $1,254.60.
U.S. data on Thursday bolstered the case for higher rates, as the number of Americans filing for unemployment benefits fell more than expected last week.
"If you just look at economics, there's a chance of more downside. The Fed was talking about another potential rate hike later this year, which is negative for gold. But there's still enough for people to worry about in geopolitics at different levels," Dahdah said.
Higher interest rates are negative for gold because they
increase the opportunity cost of holding non-yielding gold by
foregoing the chance of earning interest on cash holdings.
"We think that the price of the yellow metal will fall in
the remainder of the year as the Fed hikes rates by more than
the market currently anticipates and global risks fade," said
Capital Economics in a note.
"We remain of the view that Fed tightening will prove too
strong a headwind for the price of gold this year. Our end-2017
price forecast is $1,100 per ounce, down from about $1,255
today."
The dollar index rallied after the jobs data and
following Wednesday's Fed meeting.
Among other precious metals, silver shed 0.8 percent
to $16.74 per ounce after slipping to $16.64, the lowest since
May 19.
Platinum dropped 1.6 percent to $920.99, having hit
the lowest in over a month at $913.50, while palladium <XPD=>
shed 0.2 percent to $861.49 per ounce after rallying by 25
percent so far this year.
"We're bullish on palladium compared to last year, but we
think it has overshot," Dahdah said.
Source: Nasdaq
