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Gold falls to 1-week low as Fed sets the stage for March rate hike

Published 03/02/2017, 08:52 AM
Gold falls to 1-week low
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Investing.com - Gold prices extended losses from the prior session during North American morning hours on Thursday, falling to a one-week low as the dollar surged amid indications the Federal Reserve is preparing to raise interest rates later this month.

Comex gold futures declined $9.65, or about 0.8%, to $1,240.25 a troy ounce by 8:50AM ET (13:50GMT), after losing around $4 on Wednesday.

Spot gold was also down around $9.50 to $1,240.20 per ounce after touching a daily low of $1,235.90, a level not seen since February 22.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.3% at 102.05 in New York morning trade. The index reached a seven-week high of 102.11 earlier.

Treasury yields were little changed, with the U.S. 10-Year bond at around 2.470%, close to a two-week high, while the Fed-sensitive 2-Year yield hovered near a more than seven-year high of 1.308% touched on Wednesday.

Fed Governor Lael Brainard said on Wednesday that an improving global economy and a solid U.S. recovery mean it will be "appropriate soon" for the U.S. central bank to raise interest rates.

Her comments added an important voice to the chorus of officials this week signaling rates may rise as soon as mid-March.

More clues on interest rate hikes ahead of the central bank's March 14-15 meeting are expected to come Friday, when Fed Chair Janet Yellen speaks on monetary policy in Chicago. Vice Chair Stanley Fischer also speaks Friday.

Futures traders are now pricing in around a 75% chance of a Fed hike in March, up from around 25% at the start of the week, according to Investing.com’s Fed Rate Monitor Tool.

Odds of a second rate hike in September currently stand at 63%, while a third hike in December is priced in at 53%, aligning market expectations with the Fed's current forecast for three rate hikes in 2017.

The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar in which it is priced.

Also on the Comex, silver futures for May delivery dipped 12.2 cents, or 0.7%, to $18.36 a troy ounce after reaching $18.51 on Wednesday, the highest since November 11.

Meanwhile, platinum was down 1.3% to $1,006.10, while palladium shed 0.8% to $773.12 an ounce.

Elsewhere in metals trading, copper futures lost 2.3 cents, or about 0.9%, to $2.712 a pound.

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