Gold price slips amid talk of US rate rises

London (Mar 30)  Gold prices are heading for a second consecutive monthly fall as a rise in US interest rates appears ever likelier.

US Federal Reserve chair Janet Yellen signalled last week that the US central bank will raise interest rates later this year, meaning that cash and the US dollar may become a more attractive proposition for investors.

The gold price dropped again today, continuing a recent downward trend that followed a period of gains. At noon it was trading at $1,185 per ounce, down from $1,193 on Thursday.

The precious metal had risen for seven consecutive sessions after the Fed's meeting earlier this month – its  longest rally since 2012 – which led to a policy statement in which it said it was prepared to move more slowly in hiking US rates than the market expected.

Demand from China and India also fuelled gold's earlier climb, according to the Business Standard.

However, on Friday, Yellen said that an increase in the Fed's benchmark rate "may well be warranted later this year" because of sustained improvement in US economic conditions.

Her intervention is likely to result in a sustained fall the gold price, traders have said.

"Yellen's latest comments might just change the course of gold and cause a downward movement in the price from here on," Howie Lee, analyst at Phillip Futures, told the Australian Financial Review.

Lee predicts that gold prices may continue to drop towards $1,180 as the market prepares for the interest rate rise – which may not come until the autumn.

"Given falling oil prices and slowing growth globally they cannot afford to raise rates too early, so I think the first rate hike will happen in September," he said.

Source: TheWeek.uk