• Gold prices settled lower for a second straight session Wednesday, pressured by rising U.S. interest-rate hike expectations.
• Gold prices rose on Wednesday as the dollar slipped and minutes of the Federal Reserve's last policy meeting suggested the U.S. central bank was cautious about raising interest rates.
• Prices briefly climbed, then eased back after minutes from the Federal Reserve’s May policy meeting appeared to show that the majority of the central bank’s officials remain resolute about hiking rates at their meeting in June, which is widely expected.
• Meanwhile, copper prices sagged after China’s credit rating was downgraded by Moody’s for the first time in nearly 30 years.
June gold GCM7, +0.28% lost $2.40, or 0.2%, to settle at $1,253.10 an ounce. In electronic trading after the release of the Fed minutes, prices briefly climbed near $1,258 before easing back to $1,255 about a half-hour after the news.
• “Gold’s instant reaction to the Fed minutes was positive, as there weren’t any hawkish surprises to jolt the market,” Brien Lundin, editor of Gold Newsletter, told MarketWatch. “Still, the minutes confirmed the Fed’s intent to continue normalizing monetary policy…”
“With investors still expecting the Fed to hike at its next meeting, some shorts likely took the occasion to cover their trades by buying gold, essentially a ‘sell the news’ dynamic,” he said.
• In a note Wednesday, Commerzbank analysts pointed out that gold prices dipped below $1,250 intraday, attributing that to the fact that the probability of a Fed hike in June is back in the 80% neighborhood. Financial markets are currently pricing in an 83% probability of a rate rise in June, according to CME’s FedWatch tool.
• Bill Baruch, chief market strategist at iiTRADER, said that “weeks ago the odds of a Fed hike were near 100%, but dissipated quickly amid turmoil in Washington.”
He expects a Fed rate increase in June, and growing expectations for that should “keep gold in check.” Higher interest rates can boost the dollar and dull demand for dollar-denominated commodities. Rising rates also leave gold less appealing than yield-bearing assets.
“We remain long term bullish, but in the very near term believe there is more room to the downside,” Baruch said.
• Back on Comex, other metals settled broadly lower. July silver SIN7, +0.25% fell 2.2 cents, or 0.1%, to finish at $17.117 an ounce.
• July copper HGN7, -0.21% fell 1.3 cents, or 0.5%, to end the session at $2.584 a pound.
Reference: Reuters, Market Watch
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