Tuesday, May 17

Gold hits over 2-week low on hawkish Fed bets, firmer dollar


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Gold prices dipped on Monday to their

lowest in more than two weeks, as bets for an increasingly

aggressive and hawkish US Federal Reserve approach to

tightening policy monetary boosted the dollar and pressured

demand for bullion.

Spot gold was down 0.3% at $1,923.74 per ounce, as of

0321 GMT, hitting its lowest since April 7. US gold futures

were down 0.6% at $1,923.30.

Although the 10-year US Treasury yield is nearing 3% and

theoretically that’s supposed to be a tipping point for gold, it

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is more about real yields that are starting to catch up and that

will weigh on gold, said Stephen Innes, managing partner at SPI

Asset Management.

With expectations for a half-percentage point interest rate

hike at the Fed’s May meeting now locked in, traders on Friday

piled into bets that the US central bank will go even bigger

in subsequent months.

The dollar firmed near its highest in two years,

making greenback-priced gold costlier for other currency

holders.

Gold is highly sensitive to rising US short-term interest

rates and higher yields, which increase the opportunity cost of

holding non-yielding bullion. It is, however, seen as a safe

store of value during economic and political crises.

Gold still has some intrinsic value when economies slow

because then, banks don’t want to raise interest rates, Innes

said, adding: “The market is pricing in rates, rates, rates. But

what happens if the economy starts tanking very aggressively?”

US officials arrived in Kyiv late on Sunday and held talks

with President Volodymyr Zelenskiy, an aide to the Ukrainian

leader said, as Russia’s invasion entered a third month.

Spot silver dipped 1% to $23.89 per ounce, platinum

eased 0.4% to $927.00, and palladium fell 2.9% to

$2,305.69.

(Reporting by Bharat Govind Gautam in Bengaluru; Editing by

Sherry Jacob-Phillips)



financialpost.com

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