Gold drops to 5-week low as US dollar strengthens

The spot gold price fell to a five-week low during Asian trading hours on Monday as the US dollar strengthened following comments from US Federal Reserve speakers, including chairwoman Janet Yellen, that lifted expectations of a near-term US interest rate hike.

Spot gold was last at $1,317.15-1,317.45 per ounce, up $0.35 from Friday’s close. Trading ranged at $1,315.30-1,321.55 so far – the lower end being a five-week low for the yellow metal.

“The hawkish rhetoric out of the Fed is likely to see gold under pressure over the near-term as participants position themselves for the potential for a September rate hike and potentially a further hike after this,” MKS Group said on Monday morning.

The broker sees initial support for the metal at around $1,310-1,312, and below this, it sees bids toward $1,300.

At the Jackson Hole symposium in Wyoming last Friday, Yellen said the case for a rate increase has strengthened in recent months. Though she did not state when exactly this could happen, investors took her comments as a hawkish signal.

The US Federal Open Market Committee expects moderate growth in real gross domestic product (GDP), additional strengthening in the labour market and inflation to rise to two percent over the next few years.

In an interview after the speech, Fed vice-chair Stanley Fischer reinforced Yellen’s comments by stating that Yellen’s speech was “consistent” with a possible two rate hikes this year, while Atlanta Fed president Dennis Lockhart also said two rate hikes this year was possible.

The US dollar index rose to a fresh two-week high of 95.61 on Monday. It was last at 95.52, up 0.03 percent.

Market participants have lifted their expectations of a September rate hike to 33 percent on Friday, compared to 21 percent the previous day, according to the CME FedWatch Tool. Majority, however, sees a rate lift-off in December.

“The market has reacted accordingly, although doesn’t appear to be pushing the theme too far just yet and we suppose that seems fair given we have been in this position before, only for the Fed to get cold feet,” ANZ Research said Monday morning.

“With Yellen reiterating that all decisions remain data-dependent, this week’s payrolls report takes on plenty of importance.”

The US August jobs report will be released this coming Friday with the market expecting a non-farm employment change of 186,000.

In US data released last Friday, preliminary GDP quarter-over-quarter for the second quarter was in-line with forecasts at 1.1 percent expansion. Preliminary GDP price index over the same period expanded at 2.3 percent, a touch above the 2.2 percent forecast.

Goods trade balance for July stood at -59.3 billion, beating expectations of -62.3 billion.

University of Michigan consumer sentiment for August once again disappointed at 89.8, below the economic consensus of 90.6 and previous reading of 90.4. Inflation expectations over the same period gained 2.5 percent, matching the July figure.

US data of note later includes the core PCE price index, personal spending and personal income.

In other commodities, the Brent crude oil spot price fell 0.55 percent to $49.37, and the Texas light sweet crude slipped 0.44 percent to $47.07 so far on Monday.

In equities, the Shanghai Composite fell 0.19 percent to 3,064.61 recently.

In other precious metals, silver fell to a fresh two-month low of $18.39 on Monday. It was last at $18.43/18.46, down $0.19.

Platinum was last at $1,066/1,073, up $0.5, and palladium gained $1 $682/687 recently on Friday.

On the Shanghai Futures Exchange, gold for December delivery was last unchanged at 283.75 yuan per gram, and the December silver was flat at 4,119 yuan per kilogram.

The United Kingdom is close for a bank holiday on Monday.

(Additional reporting by Dalton Barker and Ewa Manthey)

The post Gold drops to 5-week low as US dollar strengthens appeared first on The Bullion Desk.

Read More
Source: Bullion Desk News

Recent Posts