Gold Price Pares Losses as Interest-Rate Expectations Shift

San Francisco (Jun 7)  Gold prices pared losses on Tuesday as investors contemplated the likelihood that the Federal Reserve would raise interest rates in the coming months.

Gold for August delivery settled nearly flat, falling 40 cents to $1,247.00 a troy ounce on the Comex division of the New York Mercantile Exchange. The precious metal traded as low as $1,236.90 earlier in the session.

As the market has digested the Friday jobs data, traders have shifted their attention to the possibility of a rate increase in July, said Frank McGhee, head precious-metals dealer at Alliance Financial.

"You've got a lot of people that were sucked in" on Friday, he said. "And now that they start thinking about it, June was never a viable raise date, but July is there."

Higher rates put pressure on gold prices since the metal pays its holders nothing and struggles to compete with yield-bearing assets such as Treasurys when borrowing costs rise.

While monetary policy has been a large driver of gold prices this year, Jessica Fung, a metals strategist at BMO Capital Markets, said slowing global growth should help push gold higher.

"We believe focusing on the Fed alone is simplistic and only drives very near-term sentiment and volatility," Ms. Fung wrote in a Tuesday note. "The potential impact of sluggish global growth on the U.S. economy should not be ignored."

Source: NASDAQ.com