(Reuters) – Gold prices dipped on Monday as the dollar firmed in the wake of indications from the U.S. Federal Reserve last week that it will pursue a tighter monetary policy.
The Fed raised U.S. interest rates last week and said it planned four more increases by the end of 2019 and another in 2020, amid steady economic growth and a strong job market.
Higher U.S. interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding
“Gold prices remain dependent on the dollar prices at this juncture. The U.S. economy has been rosy and better than expected. Efforts by the Trump administration to reduce the trade deficit from an economic point of view has been friendly for the greenback as well,” OCBC analyst Barnabas Gan said.
“Gold has been a seller’s market for some time, but with the $1,190 level yielding, we’re now firmly in the gold bear zone and as such with the dollar likely to strengthen on the back of widening interest rates differentials, selling activity could intensify with speculators likely to target the August low when the yellow metal hit $1,160 before rebounding,” said Stephen Innes, APAC trading head at OANDA in Singapore
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Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.