Gold Drops To 3 Week Low After Fed

Gold declined toward a three-week low in New York on speculation that an expected increase in U.S. interest rates will curb demand for a store of value. Palladium reached the highest since August 2011 on concern about supply.

The Federal Reserve announced its third $10 billion cut in monthly bond purchases last week. Gold dropped 3.1 percent last week, the most since November, as Chair Janet Yellen said benchmark interest rates may rise about six months after the asset buying ends, expected later this year.

Bullion still rose 10 percent this year on signs global economic growth may be faltering and amid tension in Ukraine. World leaders gathered in The Hague amid growing concern over a Russian buildup on its neighbor’s border as pro-Kremlin troops seized a Ukrainian base in Crimea. Palladium extended a weekly gain on concern that potential further sanctions may restrict supply from Russia, the biggest producer of the metal.

Investors are “not so concerned about the tapering part but rising U.S. interest rates,” said David Lennox, a resource analyst at Fat Prophets in Sydney. “Yellen’s comments will now be in the back of investors’ minds until we get into 2015.”

Gold for June delivery fell 0.8 percent to $1,325.30 an ounce by 7:34 a.m. on the Comex in New York. It reached $1,321 on March 20, the lowest since Feb. 28. Futures volume was 44 percent above the average for the past 100 days for this time of day, data compiled by Bloomberg showed. Bullion for immediate delivery declined 0.8 percent to $1,324.67 in London.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza