Gold succumbs to speculation of US interest rate increase this month

NEW YORK/LONDON — Gold fell 1% on Friday and was on track for its biggest weekly loss in 2017 as speculation grew that the US Federal Reserve would press ahead with a rate increase this month.

Fed Chair Janet Yellen said on Friday that the central bank is set to raise its benchmark interest rate later this month as long as economic data on jobs and inflation holds up.

Prior to Ms. Yellen’s comments, the probability of a Fed move in March had already risen to nearly 80%, money markets indicated, after hawkish comments from New York Fed Chief William Dudley and San Francisco Fed President John Williams.

“If there has been a conscious effort (to raise expectations for a rate hike) I’m about to join it,” Fed Vice-Chairman Stanley Fischer told an economists’ forum, when asked about comments by other Fed officials this past week that have boosted market odds of a March rate hike.

Spot gold was down 0.03% at $1,234.41 an ounce by 2:22 p.m. EST ( 1922 GMT), after falling 1% to $1,222.51, the lowest since Feb. 15. US gold futures for April delivery settled down 0.50% at $1,226.50.

Gold prices have retreated more than 2% after failing to decisively break through resistance at their 200-day moving on Monday.

“The market has responded very clearly to the more aggressive stance by FOMC members regarding rate hikes in March,” Mitsubishi analyst Jonathan Butler said.

“It’s fair to say that a rate hike in March is pretty much priced into gold.”

Gold is highly sensitive to rising US interest rates as they increase the opportunity cost of holding non-yielding bullion, while boosting the dollar in which it is priced.

The world’s largest goldbacked exchange- traded fund, SPDR Gold Shares, reported a second daily inflow on Thursday, of 1.8 tons, bringing the weekly rise to 4 tons.

The dollar, however, took a breather after two days of gains on Friday.

Among other precious metals, spot silver turned up 0.80% to $ 17.89 but was set to close the week lower for the first time in 2017. “True to form, physical demand has not driven silver prices, but political uncertainty has driven greater investor interest in silver,” said Standard Chartered in a note.

Palladium was 0.10% higher at $768, while platinum rose 1% to $995.30. —