Gold Slips Toward $1,200 as Interest Rate Outlook Boosts Dollar
- Capitals & Squares Llc
- May 26, 2015
- 2 min read
Gold slipped, extending the biggest weekly loss since April, as prospects for the first U.S. interest rate increase since 2006 helped to push the dollar to a one-month high. Silver and palladium declined.
Federal Reserve Chair Janet Yellen said she expects to raise rates this year if the economy meets her forecasts. Inflation is moving toward the Fed’s 2 percent target, with a report on Friday showing that core consumer prices climbed 0.3 percent in April, the biggest gain in more than two years. While a pickup in inflation can boost demand for bullion as a hedge, higher borrowing costs cut the allure of the metal, which generally provides returns only through price gains.
If the Fed “does plan to raise interest rates this year, it’ll be quite bearish on gold,” said Raymond Mok, head of foreign exchange and bullion development at Sucden Financial Ltd.’s Hong Kong unit. “I don’t see $1,200 as a strong support, given the strength in dollar.”
Bullion for immediate delivery lost as much as 0.3 percent to $1,202.95 an ounce and traded at $1,203.92 at 1:07 p.m. in London, Bloomberg generic pricing showed. The metal dropped 1.5 percent last week, the most since the period to April 24.
Gold for August delivery traded at $1,204 an ounce on the Comex in New York. Futures trading volume was 44 percent below the 100-day average for the time of day.
The Bloomberg Dollar Spot Index, a gauge of the greenback’s strength against 10 major counterparts, rose as much as 0.2 percent to the highest since April 27. The measure advanced 2.6 percent last week, the most since September 2011.
“We expect continued strengthening of the dollar and gradual increase in U.S. real rates to push gold prices further down,” Goldman Sachs Group Inc. said in a commodities report. The bank forecast futures at $1,180 an ounce in three months, $1,150 in six months and $1,050 in 12 months.
Silver for immediate delivery retreated 0.3 percent to $17.0593, dropping for a second day. Platinum added 0.1 percent to $1,147.12 an ounce, while palladium dropped 1.2 percent to $780.30 an ounce.
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