Published: Wed, May 16, 2018
Markets | By Otis Pena

Gold futures drop to lowest of year as United States dollar rallies

Gold futures drop to lowest of year as United States dollar rallies

Among the S&P industry groups, the rate-sensitive real estate space ended at the bottom of the standings with a 1.7% loss, including a 3.8% rout in the iShares U.S. Home Construction ETF.

Spot gold rose 0.3% to $1,293.89 an ounce at 3.30am GMT, after shedding 1.7% and marking the lowest this year at $1,288.31 in the previous session.

Israeli troops shot dead dozens of Palestinian protesters on the Gaza border on Monday when the high-profile opening of the US embassy to Israel in Jerusalem by the Trump administration raised tension to boiling point. "Investors are watching the US bonds and the dollar closely and taking cue from there for the direction of gold price", said Joshua Rotbart, managing partner, J. Rotbart & Co in Hong Kong. "Therefore it has not become a big driver for gold", said Argonaut Securities analyst Helen Lau.

Yields and the dollar are likely to rise further, pushing gold to US$1,275 by the end of June and US$1,250 by year end, below the US$1,310-US$1,360 range it has inhabited since January, said ABN AMRO analyst Georgette Boele.

Meanwhile, a firmer dollar and stronger U.S. bond yields on Tuesday, after a Federal Reserve official backed the case for further interest rate hikes in United States, were limiting upside for gold.

The dollar eased 0.1 percent to 92.408 versus a basket of six major currencies, retreating further from its 2018 peak hit last week, after softer economic data last week curbed prospects of aggressive rate increases in the US.

Higher interest rates in the United States amid a rising dollar will continue to add downward pressure on gold, Lau said.

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"Rising US bond yields and a stronger dollar were factors behind gold's decline below the $1,300 level".

While global political tension continued to provide safe-haven support to the metal, investors said the main price drivers would likely remain a stronger dollar and rising United States interest rates.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.17 per cent to 856.17 tonnes on Monday.

Reuters technical analyst Wang Tao says spot gold could bounce to resistance at $1,302 before falling again.

Silver was down 0.4 percent at $16.43 per ounce.

Platinum was 0.3% higher US$895.70 an ounce and palladium lost 0.2% to US$980.72 an ounce.

Britain's Competition and Markets Authority said on Tuesday it would examine whether a takeover of miner Lonmin by South Africa's Sibanye-Stillwater would lessen competition.

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