Gold Price Drops as Fed’s Williams Flags Support for Earlier Rate Rise

London (Aug 19)  Gold fell, ending its longest winning run in six weeks as the dollar rebounded and a Federal Reserve policy maker said the U.S. is strong enough to warrant an increase in interest rates sooner than markets expect.

Bullion for immediate delivery fell 0.5 percent to $1,346.29 an ounce by 11:09 a.m. in London, according to Bloomberg generic pricing. The Bloomberg Dollar Spot Index rose 0.5 percent after Fed Bank of San Francisco President John Williams said Thursday it makes sense to get back to a pace of gradual increases, preferably sooner rather than later. 

While the Fed’s hesitation in lifting rates this year has helped boost gold by 27 percent, recent comments have raised the possibility of a move before year-end. Minutes of the central bank’s last meeting released Wednesday struck a dovish tone, pushing the odds of a December increase below 50 percent. Investors will look for further clues as Chair Janet Yellen speaks Aug. 26 at an annual gathering in Jackson Hole, Wyoming.

“The market remains very twitchy around anything that relates to the Fed,” said Neil Meader, an analyst at Metals Focus Ltd. in London. “This period of consolidation we’ve seen in prices is a reflection of the lack of clarity on when the next increase will occur.”
Gold may be volatile in the coming days, according to technical analysts. A triangle-shaped formation has kept prices in check since early July, when the metal traded between $1,310 and $1,370 an ounce. Now, gold is likely to move out of the triangle and start rallying, said Andy Pfaff, chief investment officer for commodities at MitonOptimal Group in Cape Town.

In ETFs and other metals:
•Holdings in exchange-traded products backed by bullion slipped 0.1 percent to 2,027.6 metric tons, according to data compiled by Bloomberg as of Thursday.
•Silver declined 1.5 percent and platinum fell 1.6 percent, the most in a week.
•Palladium slid 0.8%.

Source: Bloomberg