“We believe there is an 80% chance that the Fed will increase the interest rate one more time this year”, said ThinkMarkets’ chief market analyst Naeem Aslam.
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Gold is headed for the first monthly decline since May as investors price in the prospect of higher US borrowing costs by the end of the year and slowing purchases of bullion-backed exchange-traded funds.
Apple Inc was the largest weight on USA stock indexes on Tuesday after antitrust regulators ordered the company to pay about $14.5 billion in back taxes to the Irish government, but gains in bank shares partly offset the decline.
“There is some buying today. people are taking the view that gold is going to fluctuate within a tight range prior to a strong signal from the Fed”, said Richard Xu, fund manager of China’s top gold exchange-traded fund (ETF) HuaAn Gold. “We can choose the pace but we choose the pace on the basis of data that are coming in”. The U.S. dollar rose against a basket of currencies as investors waited to see if Friday’s U.S.jobs report would support expectations that the Federal Reserve will raise interest rates soon.Oil prices fell for a second straight day on the dollar’s strength and worries about crude oversupply.
USA stocks slipped on Tuesday after strong US economic data stoked concerns about the impact of a potential Federal Reserve interest rate hike this year and a drop in technology shares, while European stocks and the dollar hit multi-week highs.
Yesterday, the Dow Jones added 0.58%, or 107 points, to 18,502, while the broader S&P500 index gained 0.52%, or 11 points, at 2,180 and the tech heavy Nasdaq added 0.26%, or over 13, to 5,232.
Mounting expectations for a Fed hike this year boosted European financial stocks and helped the pan-European STOXX 600 hit its highest level since mid-August.
Shares in Apple Inc.
Government-bond prices in the US remained relatively flat Tuesday amid light trading as investors continued to digest remarks by federal officials.
The Nasdaq Composite was down 7.80 points, or 0.15 percent, at 5,224.52.
Silver was down 0.4 percent at $18.77 an ounce, having hit a two-month low of $18.36 in the previous session.
The focus on US rates put bonds under pressure, with German Bund yields pulled up by 10-year Treasury’s rise to 1.5850 percent.
So a strong August employment report on Friday could mean that rates are hiked on September 21 at the next Federal Open Markets Committee meeting.
Spot gold prices hit a six-week low of $US1311.65 on the strength in the dollar.
USA stock markets closed higher on Monday (http://www.marketwatch.com/story/worries-about-yellens-jackson-hole-speech-stop-dow-futures-in-their-tracks-2016-08-26), rebounding from Yellen-fueled losses (http://www.marketwatch.com/story/worries-about-yellens-jackson-hole-speech-stop-dow-futures-in-their-tracks-2016-08-26).
The precious metal is particularly sensitive to a rise in rates as it increases the opportunity cost of holding non-yielding commodities such as bullion.
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West Texas Intermediate crude oil settled lower by 1.34% to $46.35 a barrel. United States crude settled down 63 USA cents, or 1.34 per cent, at $US46.35 per barrel.
