Tags: gold | slump | fed | rates

Gold in Longest Slump Since November as Fed Signals Higher Rates

Gold in Longest Slump Since November as Fed Signals Higher Rates
(AP)

Tuesday, 24 May 2016 07:06 AM

Gold fell for a fifth day, heading for the longest slump in six months, as more Federal Reserve officials weighed in with comments that supported the case for higher borrowing costs, strengthening the outlook for the dollar and denting the metal’s allure.

Bullion for immediate delivery declined as much as 0.5 percent to $1,242.95 an ounce and was at $1,243.83 at 3:05 p.m. in Singapore, according to Bloomberg generic pricing. Five days of losses would be the longest stretch since November 17.

Gold has dropped over the past three weeks as the dollar has advanced, eroding 2016’s gains as traders price in higher chances of a U.S. rate increase sooner rather than later, supported by comments from a slew of policy makers and the minutes of the Fed’s April meeting.

Fed Chair Janet Yellen speaks at Harvard University on Friday after Philadelphia Fed President Patrick Harker said on Monday that he could see two to three rate hikes in 2016, while his San Francisco counterpart John Williams said two to three increases this year are still “about right.”

“We’ve had all the Fed bigwigs out trying to talk up an interest rate rise in the U.S. in June,” David Lennox, an analyst at Fat Prophets in Sydney, said by phone. “We all want to get that insight into when that next rate rise will come in the U.S.”

Odds Double

The odds of a move next month have more than doubled to 32 percent since the start of May, according to futures bets tracked by Bloomberg. “Increasing chances of a rate hike in June are likely to continue to weigh on gold,” Australia & New Zealand Banking Group Ltd. said in a report, citing what it described as a procession of Fed speakers who’d made the case for a normalization in interest rate policy. 

While prices have dropped this month, it may prove to be an opportune moment to “buy the dip,” analysts at Citigroup Inc. said in a May 24 report. The bank raised its year-end forecast by $100 to $1,250, anticipating just one rate increase in 2016 toward the end of the year, “effectively limiting the likelihood of a correction in gold prices for the next two quarters,” according to the report.


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Gold fell for a fifth day, heading for the longest slump in six months, as more Federal Reserve officials weighed in with comments that supported the case for higher borrowing costs, strengthening the outlook for the dollar and denting the metal's allure.Bullion for...
gold, slump, fed, rates
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2016-06-24
Tuesday, 24 May 2016 07:06 AM
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