Gold near lowest in over three months ahead of Fed meeting

Singapore (Mar 16)  Gold was stuck near its lowest in over three months on Monday, pressured by a stronger dollar ahead of a key Federal Reserve policy meet this week that could hint at the timing of any hike in U.S. interest rates.

Spot gold edged up 0.3 percent to $1,162.50 an ounce by 0753 GMT. The metal hit its lowest since Dec. 1 last week at $1,147.10, after strong U.S. jobs data stoked speculation that the Fed would increase rates in June.

Investors will be watching the Fed's two-day policy meet that begins on Tuesday for clues on how soon it could raise interest rates. Higher rates could dent demand for gold, which does not pay any interest.
    "A huge decline (in gold prices) could once again be
expected should the FOMC conference throw up hawkish surprises,"
said Phillip Futures analyst Howie Lee, referring to the Fed's
Federal Open Market Committee.
    "The usual rhetoric of an improving U.S. economy and
lessened slack in the labour market will undoubtedly add
strength to the bears," he said.
    Even just the removal of the term "patient" regarding higher
rates could send prices to as low as $1,125, Lee said.
    After successive months of strong jobs data, expectations
have been growing that the Fed will signal a June rate rise by
dropping a pledge to be "patient" in considering such a move.
 
    The dollar has already been boosted by prospects of higher
rates, trading near a 12-year high against a basket of major
currencies.
    A stronger greenback hurts gold's safe-haven appeal, while
also making it more expensive for holders of other currencies.
    Investor sentiment towards gold has been bearish. Holdings
in SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, fell 0.28 tonnes to 750.67 tonnes on
Friday - the lowest since late January.
    Hedge funds and money managers reduced their bullish stance
in Comex gold and silver for the sixth straight week in the week
ended March 10, U.S. Commodity Futures Trading Commission data
showed on Friday.
    In the physical markets, lower gold prices attracted some
bargain hunters, but not in sufficient numbers to boost prices,
said traders.
    In the second biggest consumer, China, premiums on the
Shanghai Gold Exchange were about $5-$6 an ounce above the
global benchmark, stronger than Friday's premiums.

Source: Reuters