Gold price hits near 5-week low after Fed strikes hawkish note
London (Aug 29) Gold slid to a near five-week low on Monday after comments from top Federal Reserve officials fuelled speculation that U.S. interest rates would rise sooner rather than later, weighing on the dollar.
Speaking at a meeting of leading central bankers in Jackson Hole, Wyoming, Fed chair Janet Yellen said on Friday that an improvement in the economy and the labour market in recent
months had boosted the case for hiking rates.
The CME Group's FedWatch tool showed the market pricing in more than a 30 percent chance of a hike in September, up from 18
percent before Yellen and her deputy Stanley Fischer spoke.
Spot gold touched its lowest since July 26 at
$1,314.70, and was down 0.2 percent at $1,318.66 an ounce at
0915 GMT. U.S. gold futures for December delivery were
down $4 an ounce at $1,321.90.
Gold whipsawed on Friday, rising as much as 1.5 percent in
the immediate wake of Yellen's comments, before slipping back to
end the day marginally lower.
"The market was surprised (by Yellen) -- that is why it went
all the way up first, before losing it all," Afshin Nabavi, head
of trading at MKS in Switzerland, said. "The demand for physical
(gold) is still very poor, so it feels like we may need to test
lower levels first before a surge in price."
Gold's volatility tracked fluctuations in the dollar. The
U.S. currency gave up gains soon after Yellen spoke because she
gave no indication that a rate hike was imminent, but rebounded
as traders reassessed her words, and after Fed Vice Chair
Fischer said the Fed was still on track to lift rates this year.
Gold is highly sensitive to rising U.S. interest rates,
which increase the opportunity cost of holding non-yielding
bullion while boosting the dollar, in which it is priced.
"The pressure on gold will likely increase as we go into
September, as participants are now more willing to bet on a rate
hike given what they have gleaned from top Fed officials on
Friday," INTL FCStone said in a note.
Hedge funds and money managers increased their net long
position in COMEX gold contracts in the week to Aug. 23, U.S.
Commodity Futures Trading Commission (CFTC) data showed on
Friday.
Silver was down 0.3 percent at $18.55 per ounce,
having earlier touched its lowest in more than eight weeks at
$18.36 an ounce.
Platinum, the biggest faller among the major precious
metals last week, was up 0.7 percent at $1,074.80 an ounce,
while palladium was down 0.2 percent at $684.22 an ounce.
Source: Reuters
