Gold price falls on dollar pressure after hawkish Fed comments

New York (Mar 1)  Gold fell on Wednesday as the dollar gained after comments from U.S. Federal Reserve officials raised expectations of an interest rate hike in March and overshadowed President Donald Trump's first major policy speech to Congress.

New York Fed President William Dudley -- one of the most influential U.S. central bankers -- said the case for tightening monetary policy had become "a lot more compelling", while San
Francisco Fed President John Williams said he saw "no need t delay" raising rates.            

Money market futures are now pricing in close to a 70 percent chance of a rise in official interest rates in March, compared with a little more than 30 percent on Tuesday.

"Rate rises are now priced in to futures but not in to gold,
so the risk is to the downside (for gold)," said Mitsubishi
analyst Jonathan Butler.
    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.
    Spot gold        dropped 0.2 percent to $1,244.86 an ounce
by 1104 GMT, heading for a third straight day of losses. The
metal hit its highest since Nov. 11 at $1,263.80 on Feb. 27.
    U.S. gold futures         fell 0.6 percent to $1,246.40.
    "Fed Chair Yellen will be giving a speech on Friday. If
Yellen’s remarks also point to a rate hike in the near future,
this will presumably cause the dollar to further appreciate and
will weigh on the gold price," Commerzbank said in a note.
    Expectations that Trump would give details on stimulus plans
on Tuesday were largely disappointed, with the President failing
again to provide detail on tax reform and infrastructure
spending.            
    The speech did, however, contrast with the harsher rhetoric
heard during Trump's election campaign, tempting some investors
back into riskier assets and slightly knocking gold's appeal as
a safe haven in times of political or economic upheaval.
    "Gold prices are reacting to the bullishness in other
markets and are easing accordingly. That said, with U.S.
President Trump’s speech not giving much substance there is
still room for disappointment," said FastMarkets analyst William
Adams.
    The dollar index        was up 0.5 percent at 101.65.
    India's February gold imports surged more than 82 percent
from a year ago as consumers ramped up purchases for weddings,
provisional data from consultancy GFMS showed.            
    Spot silver        rose 0.4 percent to $18.39 an ounce,
platinum        was also up 4 percent at $1,026.9 and palladium
       gained 0.9 percent to $777.49.

Source: Reuters