Fed hike views lift dollar, keeps gold near 3-week low

LONDON — Gold hovered near three-week lows on Wednesday as the dollar firmed on expectations of a US interest rate increase in June and the market discounted a surprise win by France’s far-right presidential candidate.

The US Federal Reserve was expected to hold interest rates steady after concluding its two-day meeting on Wednesday, but it might focus on future rate hikes, which would reduce demand for non-interest bearing gold.

Spot gold was down 0.2 per cent at $1,253.86 per ounce, as of 1000GMT after touching its lowest since April 10 on Tuesday at $1,251.37.

US gold futures fell 0.1 per cent to $1,255.40 an ounce.

“The focus for gold today is definitely on the Fed and markets are now speculating that next hike will take place at the June FOMC meeting,” said Quantitative Commodity Research analyst Peter Fertig. “We have the typical drivers for gold: the US interest rate... the US dollar and also a decline of political uncertainty in Europe,” he said. As well as reducing demand for noninterest bearing gold, higher rates would make the dollar-denominated metal more expensive for buyers paying with other currencies.

The dollar firmed 0.1 per cent at 98.920 against a basket of major currencies.

“The yellow metal is finding it difficult to move away from $1,250 amid firming global equity markets,” said Sam Laughlin, senior precious metals trader, MKS PAMP Group.

“Should we see any surprises from the Fed to push gold below the 200-day moving average, expect the next target on the downside to sit around $1,230 - $1,235, however, risks surrounding the upcoming French election should temper declines.”

Silver was flat at $16.80 per ounce, after touching a fresh threemonth low of $16.71.

Platinum hit a four-month low of $911, before moderating to trade 0.2 per cent down at $920.90.

Palladium rose 0.9 per cent to $807.35 per ounce.

The focus for gold today is definitely on the Fed and markets are now speculating that next hike will take place [in] June Peter Fertig, analyst at Quantitative Commodity Research