Gold Drops as Fed Rate Hike Gets Support

Gold fell to an eight-month low on Thursday after the U.S. Federal Reserve’s reiteration that interest rates were likely to rise this year pushed the dollar index to a six-week high.

A global share rally after the Greek parliament passed the austerity measures demanded by lenders to open talks on a multi-billion-euro bailout also diverted some attention from gold.

Platinum hit its lowest since February 2009 at $1,000.25 an ounce, hurt by perceptions of plentiful supply. Top producer Anglo American Platinum said on Thursday its output rose 60 percent in the second quarter.

Palladium slipped to its lowest since November 2012.

Spot gold had fallen 0.4 percent to $1,144.60 an ounce by 1402 GMT, while U.S. gold futures for August delivery were down $4.00 an ounce at $1,143.40.

Spot prices fell earlier to their lowest since November at $1,142.10 after Federal Reserve Chair Janet Yellen confirmed on Wednesday the central bank will likely raise interest rates later this year if the U.S. economy expands as expected.

Gold is sensitive to rising U.S. interest rates, as they increase the opportunity cost of holding non-yielding bullion and help the dollar.

via Reuters

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 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