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