Yellow metal drops to four-month low as dollar climbs before Fed meeting

NEW YORK/LONDON — Gold slid to a four-month low on Tuesday 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.

Bullion also looks vulnerable after breaking through 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 0.7% at $ 1,305.72 by 1: 37 p. m. EDT (1737 GMT), off an earlier low of $1,301.51, its weakest since Dec. 29. US gold futures for June delivery settled down $12.40, or 0.90%, at $1,306.80 per ounce.

The dollar hit a 3-1/2-month high versus the euro ahead of the Fed meeting starting on Tuesday and moved into positive territory for the year against a basket of currencies.

“Gold is down, since the dollar is up ahead of the Fed meeting,” said Josh Graves, senior market strategist at RJO Futures.

While the US central bank is widely expected to stand pat on policy for now, market participants will be closely watching the twoday meet for hints of an interest rate hike in June.

Rising interest rates typically weigh on gold, as they increase the opportunity cost of holding nonyielding 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.

Global political tensions about the Korean Peninsula continued to fade, pressuring gold prices, Graves said. Investors see the metal as a store of value during times of political and economic duress.

Gold now looks vulnerable to further losses after breaking through key support levels, according to technical analysts, who study past price patterns to predict the direction of trade.

Silver shed 1.2% to $16.11 an ounce, earlier hitting $ 16.04, a more than four-month low. Palladium declined 2.3% to $942.60 an ounce, earlier touching $939.47, a three-week low.

Platinum dropped 1.2% to $892.10 an ounce. The white metal used in autocatalysts and jewelry dipped earlier in the session to $888.50, its lowest since Dec. 18. It was the biggest faller among major precious metals last month, sliding 2.7% in a third straight monthly loss. —