Gold Falls Under $1,200 as June Rate Hike Possibility Rises

Gold fell below $1,200 for the first time since mid-February on Monday, as comments from Federal Reserve chief Janet Yellen on the likelihood of higher U.S. interest rates sent the dollar to two-month highs.

The Fed should increase interest rates “in the coming months” if the economy picks up as expected and jobs continue to be generated, Yellen said on Friday, bolstering the case for a rate hike in June or July.

St. Louis Fed President James Bullard said on Monday that global markets appear to be “well-prepared” for a summer rate hike, although he did not specify a date for the policy move.

An increase in rates would raise the opportunity cost of holding gold, which does not earn interest. It would also bolster the dollar, making gold more expensive for other currency holders.

via CNBC

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, he 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