Gold futures set a new low on Wednesday morning in the US amid new evidence that the US recovery continues, stoking talk of an interest-rate rise in the near term.
Gold for June delivery on the Comex division of the New York Mercantile Exchange was last down $5.10 or 0.4 percent at $1,224.10 per ounce. Earlier, the contract touched $1,220.50, the lowest since April 5.
The minutes of the Federal Open Market Committee (FOMC) April meeting have been a major driver of market action over the past week – they showed that most US central bankers are increasingly comfortable lifting in terest rates this summer amid reduced fears about global growth and signs that the US recovery is gaining momentum.
That perspective was supported yesterday when US home sales came set an eight-year high, suggesting the poor first quarter was an aberration.
“A number of factors are responsible for the sharp price fall: for example, expectations of interest rate hikes in the US have risen further following speeches and statements made by various Fed members and following the publication of positive US real estate market data, as has also been reflected in a more sharply appreciating US dollar and in higher yields on ten-year US Treasuries,” Commerzbank said.
Even a minor consolidation for the dollar was not enough to trigger a recovery in gold, with the dollar index last at 95.48.
Looking ahead, Fed chair Janet Yellen is scheduled to appear at Harvard on Friday, along with former chairman Ben Bernanke – investors will scrutinise her speech for any references to US monetary policy.
Still, uncertainty about whether the UK will vote to stay in the European Union is creating market anxiety and helping to stimulate safe-haven buying.
“The correction in gold will be a good test of overall market sentiment if a turnaround has indeed occurred,” FastMarkets analyst Andy Farida said. “Perhaps we will see further price weakness in the short term but will be watching to see if it starts to attract physical buying from China and India.”
“Moreover, there are various geopolitical risks such as June Brexit in the coming weeks, which may well support gold prices,” he added.
ETFs started to reflect the recent price downturn, with holdings in the funds tracked by FastMarkets falling 3.75 tonnes. ETFs had sert repeated yearly highs in recent sessions.
In data today, the US goods trade balance for April at -$57.5 billion was better than the forecast of -$60.1 billion. Later, the HPI, the flash services PMI and crude oil inventories are scheduled for release.
In European markets, Germany’s DAX and France’s CAC-40 were up 1.3 percent and one percent respectively while the dollar softened by 0.1 percent to 1.1147 against the euro.
As for other precious metals, Comex silver for July settlement gained 7.1 cents or 0.4 percent to $16.325 per ounce. Trade has ranged from $16.185 to $16.340 so far.
Platinum for July delivery dipped 40 cents or 0.1 percent to $1,003.80 per ounce while palladium at $534.50 was down $3.45 or 0.6 percent.
(Editing by Mark Shaw)
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Source: Bullion Desk News
