The gold price edged lower during Asian trading hours on Tuesday as a looming US rate hike continued to check sentiment in the commodities market.
Spot gold was last at $1,248.20-1,248.50 per ounce, down $1.40 from Monday’s close. Trading ranged at $1,246.10-1,252.30 so far.
“The main drag on commodity markets are the lingering reverberations emanating from the latest Federal Reserve minutes, prompting investors to price in a more sobering assessment of the rate outlook going forward and bidding the dollar up as a result,” said Edward Meir of INTL FCStone.
The Federal Open Market Committee’s (FOMC) hawkish April minutes released last Wednesday had raised the odds of a US rate hike in June or July, strengthening the US dollar as a result.
The US dollar index had stayed above 95 since last Thursday and was last at 95.32 on Tuesday, up 0.06 percent from the previous day’s close.
An increasing number of Federal Reserve officials also appear to be backing the case for the normalisation of US interest rates this year.
On Wednesday, St Louis Federal Reserve Bank president James Bullard said he does not expect a UK vote on European Union membership to influence the US Federal Reserve’s decision. San Francisco Fed’s John Williams said two to three rate increases this year are still “about right”, a view also echoed by Philadelphia Fed’s Patrick Harker,
Going forward, the focus will largely be on Fed chair Janet Yellen on Friday as she delivers remarks at Harvard with former chairman Ben Bernanke.
Market participants currently see a 30 percent chance of a June rate hike, though the majority 58 percent reckoned this could happen in July, according to the CME Group FedWatch.
But William Adams, head of research at FastMarkets noted that gold prices are holding up relatively well, considering the firmer dollar.
“We think this highlights investor concerns about a host of geopolitical undercurrents ranging from a potential Brexit, the US election, negative interest rates and China,” he said.
“In the near term, however, we would not be surprised if some funds take profits while prices drift, which could lead to a fast sell-off in prices, although we would expect good buying to be waiting below.”
In commodities, the Brent crude July contract price fell 0.46 percent to $48.13 per barrel while the WTI crude oil July contract price eased 0.33 percent to $47.92 so far on Tuesday.
In US data released Monday, flash manufacturing PMI for May disappointed at 50.5, below the economic consensus of 51.0 and the lowest mark since 2009.
It is a light day for data today with mainly the German and EU ZEW economic sentiment, China’s CB leading index, and US new home sales and Richmond manufacturing index of note later today.
In equities, the Shanghai Composite fell 0.69 percent to 2,823.28 recently on Tuesday.
In other precious metals, silver fell $0.02 at $16.345/$16.365. Platinum was up $5 to $1,009/1,014, while palladium was unchanged at $545/551 recently on Tuesday.
On the Shanghai Futures Exchange, gold for December delivery was unchanged at 264.85 yuan per gram and December silver was flat at 3,643 yuan per kilogram.
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Source: Bullion Desk News
