Tuesday, 31 March 2015 19:57
LONDON: Gold rebounded on Tuesday as global share markets dropped, but bullion was still heading for its second monthly fall, pressured by a strong dollar and expectations the U.S. Federal Reserve will increase interest rates this year.
Gold has fallen 2.5 percent since hitting a three-week high above $ 1,200 an ounce last week after Federal Reserve Chair Janet Yellen on Friday signalled a rate hike could be likely later this year.
Yellen’s remarks on sustained gains in the U.S. economy halted a seven-day rally in bullion — the longest rising streak since 2012 — which had been spurred by hopes the Fed would take it slow in raising rates.
“Yellen has managed to do a balancing act at the end of the last Fed meeting, on one hand removing the patience language, on the other giving the impression that rates would rise at a more sedate pace than the market initially expected,” Natixis analyst Nic Brown said.
“Our best case scenario is a June rate hike and in the interim there is certainly scope for more weakness in gold.”
Spot gold, lower initially, rose 0.2 percent at $ 1,188.60 an ounce by 1432 GMT, while U.S. gold for April delivery was up 0.3 percent at $ 1,188.50 an ounce.
Spot prices have lost 2 percent so far in March but Tuesday’s rebound helped to snap a quarterly loss – the metal was eyeing its first rise in three quarters by just 0.4 percent.
The dollar was on track for its strongest quarter since 2008 against a basket of major currencies, boosted as the Fed moves towards raising rates while most other major central banks are loosening monetary policy.
Any hike by the Fed, which has kept rates near zero since 2008 to stimulate the U.S. economy, could further reduce demand for assets perceived as safer such as gold. A firmer dollar also makes gold more expensive for holders of other currencies and typically erodes its appeal.
Investors were awaiting U.S. jobs data on Friday, with a robust report likely to increase the chances that policymakers could raise U.S. rates sooner than later.
Economists polled by Reuters forecast a 245,000-gain in U.S. jobs in March. U.S. jobs increased by 295,000 in February, marking the 12th straight month that employment gains have been above 200,000 — the longest such run since 1994.
In other precious metals, spot palladium fell to a new 13-month low of $ 721.50 on Tuesday, before rebounding slightly to trade up 0.7 percent at $ 730.75 an ounce.
Spot silver rose 0.5 percent to $ 16.76 an ounce, while platinum gained 1.8 percent to $ 1,135.74 an ounce.
Copyright Reuters, 2015
