Gold hits six-week low as dollar strengthens
Greenback climbs ahead of Fed meeting, with traders bullish on fourth interest rate hike by year-end
Gold slid to a six-week low yesterday as the dollar strengthened ahead of a US Federal Reserve policy meeting that is being watched for clues on the future pace of interest rate hikes.
The metal also looks vulnerable after breaking through key chart support in the $1,320/1,317 area, its 100-day moving average and a key retracement of its January to March decline, technical analysts said.
Spot gold was down 0.5 per cent at $1,307.95 an ounce at 1145 GMT, off an earlier low of $1,307.40, its weakest since March 20.
US gold futures for June delivery were 0.8 per cent lower at $1,308.60.
The dollar hit a three-anda-half month high versus the euro ahead of the Fed meeting starting yesterday and moved into positive territory for the year against a basket of major currencies, having surged on a recent rally in bond yields.
“Investors are buying dollars and this is adding pressure on gold,” ActivTrades analyst Carlo Alberto de Casa said.
“[The] dollar index jumped above 92, while markets are seeing growing chances for a fourth hike in 2018. Almost 50 per cent of traders [are] expecting a fourth raise by the end of the year.”
While the US central bank is widely expected to stand pat on policy for now, market participants will be closely watching the two-day meet for hints of an interest rate hike in June.
Rising interest rates tend to weigh on gold, as they increase the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced. Ultra-low rates were a key factor driving gold to record highs in the wake of the global financial crisis.
Silver was down 0.4 per cent at $16.26 an ounce, while palladium was 1.1 per cent lower at $954.47 an ounce.
Platinum was down 0.4 per cent at $899.80 an ounce. The white metal used in autocatalysis and jewellery dipped earlier in the session to $892.10, its lowest since December 18.