Gold has fallen one per cent to a near five-and-a-half-year low as the US dollar rose after data showed that the US economy had improved in the second quarter, supporting views that the Federal Reserve would lift rates by year-end.
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The data came after the Federal Reserve said in its rate statement on Wednesday that the economy and the labor market had continued to strengthen, reinforcing expectations for an initial rate hike at its September meeting. The market expects a move as early as September.
The metal’s retreated 7.5 percent this month for the worst such performance since June 2013.
Core CPI, which excludes food, energy, alcohol, and tobacco costs, increased by 1.0% this month, above expectations for an uptick of 0.8%.
“It’s the same old story, there’s just been no positive news for gold”, Matthew Turner, an analyst at Macquarie Group, said. “We are still probably headed a little bit lower”.
Increasing rates reduce the allure of gold as the metal doesn’t pay interest or give returns like other assets such as equities and bonds.
Fed policy makers expressed satisfaction with progress toward full employment and used one word – “some” – to describe the additional gains it wants before raising rates. Prices will drop to $984 before January, as said by the average estimate in a Bloomberg survey of 16 analysts and traders. That would be the lowest since 2009.
“Gold remains under pressure, within a percent or so of recent lows”, Tai Wong, the director of commodity-products trading at BMO Capital Markets Corp.in New York, said in a telephone interview. “For gold as a store of value, that’s a death cross”.
Gold for immediate delivery rose 0.2 percent to $1,097.10 an ounce at 4:20 p.m.in New York, as reported by Bloomberg generic pricing.
The dollar was steady against a basket of currencies, on track for an nearly two percent monthly rise, making dollar-denominated bullion more expensive for foreign investors.
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Gold for December delivery, the contract with the most open interest, fell 0.4 percent to $1,084.60 an ounce on the Comex in New York. It was last down 0.7 percent at $1,088 an ounce. Platinum for October delivery added 5 dollars, or 0.51 percent, to close at 989.90 dollars per ounce.
