Gold Prices Holds Near 1-Month Low on Stronger dollar; Fed Rate Hike Prospects

Gold Prices Holds Near 1-Month Low on Stronger dollar

Gold futures prices sank to a 1-month low trade on Tuesday, extending overnight losses, as the US dollar edged higher as expectations rose that the Fed’s will hike interest rates near by June month, but prices came off their lows as late-day short-covering entered the market.

Gold for June delivery on the Comex Exchange tumbled to a daily low of $1,235.80 a troy ounce, a level not seen since April 26.

Spot gold fell to $1,242.63 an ounce, the lowest since April 28, in earlier trade, and was down 0.1 percent at $1,250.96 an ounce.

The US dollar index, which measures the strength of the greenback versus a trade-weighted basket of six major currencies, hit 95.56 in early trading, the most since March 29 and was last at 95.50, up 0.3%.

The last signal came from Philadelphia Chairman of the Federal Reserve Bank of Patrick Harker who told on Monday that two or three increases in the rates are possible this year if the economy keeps growing as projected.

US gold futures have declined above 4% so far in May as recent comments by Fed officials and meeting minutes of April the Fed have convinced many analysts and investors that a rate hike in June or July is a real possibility.

The probabilities of a rate hike by the Fed for June stood at almost 35% Tuesday morning, compared to only 4% of the previous week, according to the futures markets. July probabilities were about 60%.

Fed political are scheduled to speak this week and is expected to support the case for a rate hike within months. Fed President Janet Yellen will be at an event organized by the panel Harvard University on Friday.

Holdings in gold-backed ETF rose 1 percent to 869.26 tonnes on Friday, the highest since Nov 2013.

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