Gold down as Fed of­fi­cial's com­ments back Sept rate hike

The Pak Banker - - INTERNATIONAL BUSINESS/SPORTS -

Gold edged lower on Wed­nes­day, hov­er­ing around a 5-1/2-year low as the dol­lar strength­ened af­ter com­ments from a Fed­eral Re­serve of­fi­cial added weight to the like­li­hood of a U.S. in­ter­est rate hike as early as next month.

At­lanta Fed­eral Re­serve Pres­i­dent Dennis Lock­hart said it would take "sig­nif­i­cant de­te­ri­o­ra­tion" in the U.S. econ­omy for him to not sup­port a rate hike in Septem­ber, ac­cord­ing to the Wall Street Jour­nal. Higher in­ter­est rates in the United States would in­crease the op­portu- nity cost of hold­ing gold, an as­set that does not earn in­ter­est. The me­tal lost nearly seven per­cent of its value in July on the prospect of the first U.S. rate hike in nearly a decade.

Spot gold was down 0.1 per­cent at $1,085.80 an ounce by 0923 GMT. Bul­lion breached an im­por­tant sup­port level at $1,100 in a late July rout that pulled it as low as $1,077, its weak­est since Fe­bru­ary 2010. U.S. gold for de­liv­ery in De­cem­ber slipped 0.5 per­cent to $1,085.50 an ounce. "It is more likely than not that we see gold be­low $1,000 in Septem­ber, once the Fed an­nounces its rate hike," Dah­dah said.

"The five pil­lars that used to bol­ster the price of gold are now erod­ing: cen­tral bank de­mand has weak­ened, In­dian con­sump­tion has also been weaker since 2013, U. S. quan­ti­ta­tive eas­ing has ended, ex­change- traded funds have be­come a source of sup­ply be­cause in­vestors are selling and Chi­nese de­mand is not as strong as it used to be." Plat­inum and pal­la­dium wal­lowed near multi-year lows on a global glut and prospects of slug­gish de­mand from the automotive sec­tor.

Natixis

an­a­lyst

Bernard

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