Gold Declines From Two-Week High on Renewed U.S. Rate Concerns

New York (Mar 19)  Gold fell from an almost two-week high amid renewed concern that the Federal Reserve will still raise U.S. interest rates, even as policy makers cut their outlook for borrowing costs.

Fed officials dropped a pledge to be “patient” in tightening policy in a statement Wednesday, even as they lowered their projections for rates by the end of the year. The dollar rebounded Thursday, climbing as much as 1.3 percent against 10 major peers, on speculation U.S. borrowing costs will rise as other economies stick with monetary easing.

Higher rates cut gold’s allure because the metal generally offers returns only through prices gains, sending investors to assets with better yield prospects such as bonds. Holdings in exchange-traded funds backed by the metal headed for the third straight weekly loss as investors exited gold in anticipation of an increase for borrowing costs.

“The Fed has indicated they are going to raise rates this year, even if they have not made it clear which quarter that will happen, and that’s bearish for gold,” Scott Gardner, who helps manage $450 million at Verdmont Capital SA in Panama City, said in an e-mail. “They will continue to assess data to decide on the timing.”

Gold for immediate delivery fell 0.3 percent to $1,164.27 an ounce at 9:59 a.m. New York time, according to Bloomberg generic pricing. Earlier, the metal rose to $1,177.96, the highest since March 6.

Lacking Momentum

Prices jumped 1.6 percent on Wednesday, the most since January, after Fed policy makers indicated that interest rates may rise at a slower pace than estimated. Economic growth has “moderated somewhat” and inflation remains below the desired level, the central bank said.

“The rally has been somewhat sold into overnight, and gold is lacking some momentum with nothing major on the global economic calendar for the rest of the week,” Jonathan Butler, a precious-metals strategist at Mitsubishi Corp. in London, said by phone. “Further gains in the dollar would certainly be a headwind for gold.”

Holdings in gold ETPs fell for a 16th session Wednesday, the longest run of declines since January 2014.

China will allow more miners, smelters and other participants in the gold market to import bullion as it tries to expand trade in the world’s second-largest market.

Silver for immediate delivery fell 0.1 percent to $15.9345 an ounce.

Source: Bloomberg