Gold fell to its lowest in over three months early on Monday as the dollar hit a one-month high against the yen after U.S. Federal Reserve chief Janet Yellen said the central bank could raise interest rates in the coming months.
Spot gold had dropped 0.5 percent to $1,205.70 per ounce by 0044 GMT. Bullion touched a low of $1205.50 earlier in the session, its lowest since Feb. 22.
The dollar hit a one-month high against the yen early on Monday and stood tall against other peers after Yellen's comments.
Hedge funds and money managers cut their bullish bets in U.S. gold futures and options to their lowest in almost two months after the Fed indicated it could raise interest raise rates as early as June, data showed on Friday.
Gold prices fell for a fourth consecutive week with the precious metal plummeting more than 2.8% to trade at 1215 ahead of the New York close on Friday. The decline is on pace to mark the largest weekly loss since November and more losses are likely as expectations for higher borrowing costs continue to take root.
Commentary from FOMC speakers continued to suggest the central bank remains poised to hike rates on improving US data. Remarks made by Federal Reserve Chair Janet Yellen at Harvard University on Friday were in line with general tone we’ve been getting from committee members. While she was adamant that the central bank remains “data dependent,” Yellen said she believed that a rate hike, “in the coming months” would be appropriate. Interest rate expectations have continued to build on the since last week’s release of the FOMC minutes with Fed Fund Futures now showing a 34% chance of a 25 basis point hike in June and a 52% chance for July.
Gold slid to an eight-week low on Friday and was heading for a fourth consecutive weekly drop as growing speculation that the Federal Reserve will press ahead with interest rate hikes hurt investor demand.
Spot gold was down 0.3 percent at $1,215.39 an ounce at 1340 GMT, off an earlier low of $1,211.30. US gold futures for June delivery were down $4.10 an ounce at $1,216.30.
Silver touched its lowest in nearly six weeks at $16.12, and was later down 0.3 percent at $16.25 an ounce. Platinum was down 0.6 percent at $982.40 an ounce after touching its weakest in over a month at $977.40. And was on track for its biggest weekly decline since Jan. 15. Palladium was 0.6 percent higher at $545.60.
Gold remains up 15 percent this year after a sharp first-quarter rally, but has fallen nearly 5 percent since the US Federal Reserve’s minutes were released last week.
This week, Kitco’s online survey received 790 votes. A total of 499 respondents, or 51%, said they were bullish in the week ahead, while 278, or 35%, were bearish. The neutral votes totaled 112, or 14%.
Meanwhile, 20 analysts and traders took part in a survey for market professionals. The largest chunk – nine, or 45% -- looked for prices to ease next week. Seven participants, or 35%, called for a rise, while four, or 20%, were neutral.
Greg Harmon, founder of Dragonfly Capital, looks for the downward momentum to last into next week. The trend “has changed to down after falling through rising trend support,” he said.
Colin Cieszynski, chief market analyst in Canada for CMC Markets, also looks for more downside.
“I don’t think the adjustment to a more hawkish Fed and the outflow of capital from defensive havens like gold is over yet,” he said. “G7 (Group of Seven) leaders declining to get caught up in Japanese PM (Prime Minister Shinzo) Abe's claims of crisis indicate that the point of maximum risk and fear was passed earlier this year and is now fading.”
Others, meanwhile, figure gold is due to stop its recent slide and turn higher again. The metal remains sharply higher for the year.
“The market has been fretting about the Federal Reserve raising interest rates,” said Phil Flynn, senior market strategist with Price Futures Group. “It’s been down so many days in a row that it’s probably oversold and due for a little bit of a recovery.”
“The market has been fretting about the Federal Reserve raising interest rates,” said Phil Flynn, senior market strategist with Price Futures Group. “It’s been down so many days in a row that it’s probably oversold and due for a little bit of a recovery.”
Richard Baker, editor of the Eureka Miner Report, offered a similar view.
“The good news is that there is solid support below further declines so it is likely that the possibility of a U.S. Fed rate hike next month is priced in,” he said. “I expect some recovery next week.”
Reference: DailyFX, Arabnews, Kitco, Reuters
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