Gold price falls after US Fed chair points to rate hike
Shanghai (May 24) Asian buying slows for week while Chinese investors stick with equities
Gold eased Friday, on course for its first weekly decline in four weeks, after US Federal Reserve Chair Janet Yellen said she expected an interest rate hike this year.
The dollar extended gains following the speech, after initially climbing on a stronger-than-expected rise in US core consumer prices in April.
Yellen said she expected the central bank to raise rates this year as the US economy was on course to bounce back from a sluggish first quarter and as headwinds at home and abroad begin to wane.
Spot gold, higher initially, fell 0.1 percent to $1,204.72 an ounce by 3 pm EDT (7 pm GMT). It was down 1.6 percent for the week.
US gold futures for June delivery were little changed, settling down $0.1 at $1,204 an ounce.
The market was quiet ahead of public holidays in the UK and the US Monday.
"[Yellen] did say that she was basically unmoved by the soft data, and she expected a rate hike this year, so to me that's a bearish factor for gold," said Bill O'Neill, co-founder of commodities investment firm LOGIC Advisors in Upper Saddle River, New Jersey.
"I personally think they'll wait probably until December, unless we get a run of strong economic data," he said.
The dollar rose 1 percent versus a basket of leading currencies, initially buoyed by data that showed the US Consumer Price Index (CPI) rose 0.1 percent in April, while core CPI, which strips out food and energy costs, increased 0.3 percent, the largest gain since January 2013.
The Fed is aiming for inflation at 2 percent before it will consider raising rates, but has said that a significant pickup is not a precondition to raise rates.
Higher US interest rates would increase the opportunity cost of holding non-yielding bullion.
Investor sentiment toward gold has turned bearish as prices have fallen from three-month highs reached earlier last week.
"Gold continues to be drawn toward the $1,200 pivot point. The metal has failed to move more than 3 percent on either side of $1,200 since mid-March," MKS Group said in a note.
Gold buying was slow last week in Asia, with the Chinese hooked on surging equities. Demand in India stayed weak and was unlikely to pick up as the wedding season cools.
Silver was down 0.6 percent at $17.02 an ounce, heading for a 2.6 percent weekly drop. Platinum dropped 0.9 percent to $1,141.74 an ounce and palladium fell 0.7 percent to $783.50 an ounce.
Source: GlobalTimes.cn
