“In the run-up to the first Fed rate hike it is going to be hard for gold to rally… the metal has been in a four-year bear market already and we can’t see any sustained driver that would take prices higher”, Bank of America-Merrill Lynch analyst Michael Widmer said.
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Markets are preparing for a rate hike, which would be the first in almost a decade.
The dollar rose to its highest since April against a basket of major currencies.
Atlanta Federal Reserve Bank President Dennis Lockhart, in an interview with the Wall Street Journal, said the Fed was “close” to being ready to raise short-term rates.
The shift to higher rates in the United States has been sucking funds out of emerging markets, pressuring currencies from Brazil to Mexico to South Korea.
Investors narrowed the odds on a September U.S. rate hike, with Fed fund futures implying around a 1-in-2 chance, compared with around 1-in-3 after weak wage growth data last week. Spot gold was up 0.5 per cent at $1,091.33 an ounce by 1143 GMT, but still not far above the $1,077 it hit on July 24, its weakest level since February 2010. Mr. Polcari added that even a quarter-percentage-point increase wouldn’t be enough to dissuade investors from favoring stocks.
A further slump in milk prices at the latest GlobalDairyTrade auction is expected to lead to Fonterra cutting its forecast payout to farmers, weighing on the nation’s export sector, after a board meeting on Friday. MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.5 percent.
In China, the CSI300 index of the largest listed companies in Shanghai and Shenzhen was flat after curbs on short-selling prompted a sizable bounce on Tuesday.
Losses on Wall Street on Tuesday had been modest with the Dow ending 0.27 percent lower, while the S&P 500 eased 0.22 percent and the Nasdaq 0.19 percent.
China’s stock exchanges and market watchdogs are cracking down on short-selling as part of a government-run effort to prevent a collapse in the country’s markets, which have lost nearly 30 per cent of their value since peaking in June.
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But volatility will likely return Wednesday, as several key U.S. data releases – the ADP employment report, U.S. global trade data for June and the ISM non-manufacturing index – are on tap, said Boris Schlossberg, managing director of FX strategy at BK Asset Management, in a note to clients. The contract added 0.1% on Tuesday to settle at $1 090.7 and is down 1% for the week.
