May 1, 2018 / 10:05 AM / 20 days ago

PRECIOUS-Gold hits two-month low as dollar climbs before Fed meeting

    * Dollar hits 3-1/2-month peak ahead of Fed
    * Platinum slides to lowest since mid-December
    * GRAPHIC-2018 asset returns: tmsnrt.rs/2jvdmXl

 (Updates prices, adds comment)
    By Jan Harvey
    LONDON, May 1 (Reuters) - Gold slid to a two-month low on
Tuesday as the dollar strengthened ahead of a U.S. Federal
Reserve policy meeting that is being watched for clues on the
future pace of interest rate hikes. 
    The metal also looks vulnerable after breaking through chart
support in the $1,320/1,317 area, its 100-day moving average and
a key retracement of its January to March decline, technical
analysts said. 
    Spot gold        was down 0.7 percent at $1,306.26 an ounce
at 1402 GMT, off an earlier low of $1,305.36, its weakest since
March 1. U.S. gold futures         for June delivery were 0.8
percent lower at $1,308.20. 
    The dollar hit a 3-1/2-month high versus the euro ahead of
the Fed meeting starting on Tuesday and moved into positive
territory for the year against a basket of major currencies,
having surged on a recent rally in bond yields.        
    "Investors are buying dollars and this is adding pressure on
gold," ActivTrades analyst Carlo Alberto de Casa said. "(The)
dollar index jumped above 92, while markets are seeing growing
chances for a fourth hike in 2018. Almost 50 percent of traders
(are) expecting a fourth raise by the end of the year." 
    While the U.S. central bank is widely expected to stand pat
on policy for now, market participants will be closely watching
the two-day meet for hints of an interest rate hike in June.
            
    Rising interest rates tend to weigh on gold, as they
increase the opportunity cost of holding non-yielding assets
such as bullion, while boosting the dollar, in which it is
priced. Ultra-low rates were a key factor driving gold to record
highs in the wake of the global financial crisis.
    Gold now looks vulnerable to further losses after breaking
through key support levels, according to technical analysts, who
study past price patterns to predict the direction of trade. 
    "MACD (moving average convergence-divergence) and momentum
indicators highlight downside risk and I remain bearish on gold,
targeting 1,304.30, the 200-day moving average," ScotiaMocatta
said in a note. 
    Silver        was down 0.5 percent at $16.23 an ounce, while
palladium        was 1.5 percent lower at $950.40 an ounce. 
    Platinum        was down 0.7 percent at $896.30 an ounce.
The white metal used in autocatalysts and jewellery dipped
earlier in the session to $891, its lowest since Dec. 18. It was
the biggest faller among major precious metals last month,
sliding 2.7 percent in a third straight monthly loss. 

 (Additional reporting by Eileen Soreng in Bengaluru; Editing by
Dale Hudson and Mark Potter)
  
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