Gold Prices Down 1% as Dollar Rallies

Investing.com – Gold prices fell around 1% to their lowest levels in two months on Tuesday, as a broad based dollar rally dampened demand for bullion.

for June delivery on the Comex division of the New York Mercantile Exchange were down $13.30 or 1.01% to $1,305.90 a troy ounce by 10:32 AM ET (14.32 GMT), the lowest level since March 1.

The precious metal weakened as the , which measures the greenback’s strength against a basket of six major currencies, surged to the highs of year, rising 0.73% to 92.29.

A stronger U.S. currency makes dollar denominated gold more expensive for overseas buyers.

The gains in the dollar came ahead of a that is expected to point to another two or possibly even three rate hikes this year.

The dollar index rose 2% in April after the yield on rose above the psychologically important 3% level for the first time in four years.

Rising inflation would be a catalyst to push the Fed toward raising interest rates at a faster pace than currently expected. Fed officials projected three increases in 2018 at their meetings December and March.

The Fed is due to conclude its two-day meeting on Wednesday and is not expected to take any action on interest rates. The majority of economists believe the next move higher will come its meeting in June.

Expectations for a faster pace of rate hikes tend to be bearish for gold, which struggles to compete with yield bearing assets when interest rates rise.

Markets are also looking ahead to Friday’s U.S. employment report for April, which could provide further signs of strength in the world’s largest economy.

The dollar shrugged off data showing that slowed slightly, but remained solid in April.

In other precious metal trade, dropped 1.5% to $16.15 a troy ounce, while were down 0.91% to $896.20.

Among base metals, shed 1.53% to trade at $3.027 a pound.

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