Gold prices drift south as US rate-hike expectations rise
New York (May 24) Rising U.S. interest-rate hike expectations were pressuring gold on Wednesday, while 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% eased $3.30, or 0.3%, to $1,252 an ounce. Gold prices fell $5.90 to settle at $1,255.50 an ounce on Tuesday. July silver SIN7, -0.40% fell 10 cents, or 0.6%, to $17.04 an ounce.
Commerzbank analysts noted that gold at one point on Wednesday, slipped below $1,250 an ounce, 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 in June, according to CME’s FedWatch tool.
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. The ICE U.S. Dollar DXY, -0.01% was flat at 97.348 on Wednesday. U.S. stock futures pointed to a modest gain for Wall Street, and much attention was on the 2 p.m. Eastern release of minutes of the most recent Fed meeting.
Read: Fed minutes may quell doubt about a June interest-rate hike
Dallas Fed President Rob Kaplan will appear in moderated discussion at the C.D. House Institute Annual dinner in Toronto, Canada at 6 p.m. Eastern. Minneapolis Fed President Neel Kashkari participates in town hall discussion in Ashland, Wisconsin at 6:30 p.m. Eastern.
Some say, though, that gold has enough going for it right now to keep prices supported. “While gold could face some punishment this evening if the Federal Reserve minutes cement expectations of a June rate hike, the Trump jitters should instill enough encouragement for bulls to remain in control in the medium to longer term,” said Lukman Otunuga, research analyst at FXTM, in a note to clients.
“Gold bulls need to break above $1,260 for a further incline towards $1,275,” Otunuga added.
July copper HGN7, -0.85% fell 2 cents, or 0.7%, to $2.596 a pound. Some attributed that weakness to the fact Moody’s Investor Service downgraded China’s sovereign credit rating for the first time since 1989.
“The downgrade reflects Moody’s expectation that China’s financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows,” Moody’s said in a statement.
China is a big user and importer of copper and other metals.
July platinum PLN7, -0.45% shed $5.40, or 0.6%, to $944 an ounce, while June palladium PAM7, -0.19% fell 65 cents to $771.70 an ounce.
Source: MarketWatch
