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Singapore - Gold retreated for the first time in four days as prospects for a US interest-rate increase boosted the dollar, hurting the metal’s appeal as an alternative investment.
Atlanta Federal Reserve President Dennis Lockhart and San Francisco’s John Williams said on Tuesday two interest-rate rises may be warranted this year, while Dallas Fed President Robert Kaplan said a move could come soon. Also yesterday, US data showed the cost of living climbed in April by the most in three years.
Traders now put odds of a move next month at 12%, up from 4% on Monday, and see a 65% chance of an increase by year-end, according to Fed funds futures. Higher rates reduce bullion’s appeal against interest-bearing assets.
The Bloomberg Dollar Spot Index reached the highest since March before the Fed releases minutes of its April meeting later Wednesday.
"We saw a surprise increase in US consumer activity yesterday," John Meyer, an analyst at SP Angel Corporate Finance, said by phone. "That naturally leads people to look for a potential rate rise and a stronger dollar."
Gold for immediate delivery dropped 0.6% to $1 271.93 an ounce, according to Bloomberg generic pricing. It’s still up 20% his year.
"Before the minutes, the markets may want to position themselves," Gnanasekar Thiagarajan, director of Mumbai-based Commtrendz Risk Management Services, said by phone.
In other gold news and metals:
The risks surrounding the UK’s vote on leaving the European Union next month and the US presidential election may see gold rising to $1,400 this year, according to Ole Hansen, the head of commodity strategy at Saxo Bank A/S.
Holdings in gold-backed exchange-traded funds rose 3.9 metric tons to 1 825.3 tons as of Tuesday, the highest since December 2013, data compiled by Bloomberg show. Silver declined 1.3% to $17.029 an ounce in London. Platinum fell 1.2% and palladium dropped 0.7%.
