The Fed raised U.S. interest rates last week and said it planned four more increases by the end of 2019 and another in 2020, amid steady economic growth and a strong job market.
Spot gold was down 0.3 percent at $1,188.41 at 0407 GMT. On Friday, gold touched its lowest since Aug. 17 at $1,180.34 an ounce.
U.S. gold futures were down 0.3 percent at $1,192.30 an ounce.
• “Gold prices remain dependent on the dollar prices at this juncture. The U.S. economy has been rosy and better than expected. Efforts by the Trump administration to reduce the trade deficit from an economic point of view has been friendly for the greenback as well,” OCBC analyst Barnabas Gan said.
Gold prices are likely to see lower volatility, with the Chinese markets closed for a week, for the Golden Week celebration, Gan said.
• Gold has fallen about 13 percent from an April high, largely because of the stronger dollar, which has been boosted by a vibrant U.S. economy and fears of a global trade war. Investors have bought the greenback instead of gold as a safe investment.
• Meanwhile, the United States and Canada reached a deal on Sunday to salvage NAFTA as a trilateral pact with Mexico, beating a midnight deadline with agreements to substantially boost American access to Canada’s dairy market and protect Canada from possible U.S. auto tariffs, sources with direct knowledge of the talks said.
• “Gold has been a seller’s market for some time, but with the $1,190 level yielding, we’re now firmly in the gold bear zone and as such with the dollar likely to strengthen on the back of widening interest rates differentials, selling activity could intensify with speculators likely to target the August low when the yellow metal hit $1,160 before rebounding,” said Stephen Innes, APAC trading head at OANDA in Singapore.
• Among other precious metals, palladium fell 0.7 percent at $1,065.41, after touching a fresh eight-month high at $1,094.60 an ounce in the previous session.
Silver was down 0.3 percent at $14.55 per ounce, while platinum fell 0.4 percent to $808.60 per ounce.
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· Wall Street looks for gold’s downward momentum to continue next week, while Main Street voters are in a near dead heat on whether gold will rise or fall.
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The more hawkish tone of the Federal Reserve has reignited selling pressure in gold as it has created strong tailwinds taking the U.S. dollar higher. It has been dollar strength that has been the most significant obstacle for gold pricing. Dollar strength is a direct result of higher interest rates, a favorable U.S. equities markets, and a growing U.S. economy.
A robust economy in the United States has created an extremely strong risk-on market sentiment. U.S. equities continue to trade to new record highs, and the bull market continues to have steam. As such, these factors continue to weigh heavily on gold pricing.
Our technical studies indicate that there is support for gold pricing at $1,178 and at $1,164, the low gold traded to during the first week of August. These studies also indicate that the former level of support at $1,200 has now become the first level of resistance, with major resistance at $1,218.
Reference: Reuters
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