Gold skids to 8-1/2 month low on U.S. rate hike fears
Singapore (Sept 18) Gold tumbled to its lowest in 8-1/2 months on Thursday as the dollar index jumped to a four-year peak after the Federal Reserve signalled that a faster hike in U.S. interest rates might be on the horizon.
The Fed on Wednesday renewed its pledge to keep interest rates near zero for a "considerable time", but also indicated it could raise borrowing costs faster than expected when it starts moving. "The shift higher in the anticipated Fed funds rate for the
end of 2015 and 2016 could further weigh on gold prices longer term and act as a headwind to future rallies," HSBC analysts said in a note.
"If the dollar remains firm, gold should stay on the
defensive," they said.
Spot gold fell to $1,216.01 an ounce early on
Thursday, its lowest since Jan. 2, before paring losses to trade
flat at $1,224 by 0624 GMT. The metal lost nearly 1 percent the
day before.
U.S. gold futures slid 1 percent to $1,224.70.
"Technically gold looks vulnerable, with the psychological
$1,200 and the critical $1,180 now a real possibility of being
tested in the coming days or weeks," said MKS Group dealer Jason
Cerisola.
The U.S. dollar had been gaining in strength even before the
Fed statement, as speculation rose that the U.S. central bank
would raise rates sooner than the market consensus of mid-2015.
Before Thursday, gold had dropped for four sessions out of
six on worries that any increase in rates would dim the appeal
of non-interest-bearing assets such as bullion.
Gold's slide to eight-month lows over the last week has
brought it within sight of a cluster of chart support lines near
its 2013 lows, a breach of which could set up a slide back to
$1,000 an ounce.
Any support for gold prices could come from a pick up in
physical demand in Asia as a drop towards $1,200 an ounce could
potentially attract bargain hunters.
Premiums in top buyer China picked up on Thursday, climbing
to $5-$6 an ounce, up from about $4 in the previous session.
Source: Reuters
