Gold still stalled by hawkish Fed
new york — Gold has risen more than 3 per cent this year, buoyed by international tensions and volatility in equities, but has yet to emerge from a tight trading range in the face of an expectation for rising US interest rates, traders say.
Prices for gold this week rose to their highest levels since January 25, as escalating tensions in Syria, US sanctions on Russia and the US-China trade stand-off weighed on global equities and the US dollar index.
Gold has also outperformed all other precious metals this year.
“We’ve been looking at an uptick for overall gold demand, logically correlated with an increase in volatility, slight downgrade we’re seeing in equities and the Syrian escalations,” said David Meger of High Ridge Futures.
Yet gold failed to break out of the tight trading range it’s been hemmed in for the year, between $1,300-$1,370 per ounce. The possibility that the US Federal Reserve will raise interest rates several more times this year is also capping gold’s gains.
Rising US interest rates increase the opportunity cost of holding non interest-bearing assets like bullion.
“In spite of any geopolitical event, the Fed, and the Fed minutes this week were pretty convincing that three more rate hikes are coming on the table,” said RJO Futures senior market strategist Bob Haberkorn. “That’s going to hang over gold for the rest of the year.” — Reuters