Gold prices steady after sell-off triggered by US interest rate increase

NEW YORK/LONDON — Gold was little changed on Friday as investors judged that a sell-off sparked by a rise in US interest rates last week had run its course and the dollar weakened, making bullion cheaper for holders of other currencies.

Spot gold was up 0.10% at $1,254.24 an ounce by 2:19 p.m. EDT (1819 GMT), having earlier hit $1,251.05, its lowest since May 24. US gold futures settled up 0.20% at $1,256.50.

Gold was on track for a second weekly loss and has fallen more than 3% from a high of $1,295.97 on June 6 as investors braced for the US Federal Reserve’s Federal Open Market Committee to raise interest rates and signal its policy outlook on Wednesday.

Bullion is sensitive to higher interest rates because they push bond yields higher, increasing the opportunity cost of holding nonyielding gold, and tend to boost the dollar.

“Gold has been spooked by the hawkish tone from the Fed, which triggered some long liquidation both in futures and exchangetraded funds,” said Saxo Bank analyst Ole Hansen.

Fears of more rate increases this year were heightened on Thursday by strong US economic data, though housing numbers on Friday disappointed, pushing bond yields and the dollar lower.

“If the Fed were to follow a more aggressive approach, this could preclude any significant rise in gold prices for the rest of the year,” Commerzbank analysts wrote in a note.

In other precious metals, silver was 0.20% down at $16.68 an ounce after tapping a four-week low at $16.62 and heading for a weekly decline of about 2.60%, its biggest in six weeks.

“Price action in both gold and silver of late seems to imply that traders still have plenty of shortterm long positioning on their books,” said OANDA analyst Jeffrey Halley.

Platinum gained 0.50% to $ 924.50 an ounce, having touched its lowest in more than a month on Thursday at $913.50 per ounce.

“Latest jewelry import data from China suggests an improvement on a weak 2016. This is important as Chinese jewelry demand accounts for about 20% of total platinum use,” Giovanni Staunovo, analyst for UBS Chief Investment Off ice, said in an interview.

South African mine supply, however, rose in the first quarter of 2017.

Mr. Staunovo said UBS trimmed its six- and 12- month platinum price upside forecast to $1,000 an ounce from $1,050 previously.

Palladium was down 0.30% at $867.20 and on track for its first weekly decline in four weeks. —