Profit-taking, Stronger Dollar Contribute to Weakening Gold Prices

A stronger U.S. Dollar continued to pressure June Comex Gold futures early Wednesday. Gold prices are down $9.60 or -0.74% at $1282.20. Spot gold drifted lower by 0.30% at $1281.41 an ounce after losing almost 0.4% in the previous session. Profit-taking may have also contributed to the weakness after a six day rally.

Also helping to put a lid on the recent rally and encourage further selling were comments from two Fed officials regarding the possibility of interest rate hikes this year. On Tuesday, Atlanta Fed President Dennis Lockhart said the United States could see two further interest rate hikes this year.

San Francisco Fed President John Williams said Tuesday that he would support an interest-rate hike in June as he sees continued progress in the economy, inflation and jobs.

Assets of SPDR Gold Trust, the world’s top gold-backed exchange-traded fund, rose to their highest since December 2013 on Monday as gold neared a 15-month high. Some traders read this as a sign of strength, others said it indicated that the market may be technically overbought and ripe for a short-term correction.

Silver for July delivery edged down $0.179 or -1.02% to $17.32 a troy ounce. The precious metal traded between $17.51 and $17.27 through the earlier session.

Platinum prices followed gold and silver lower, but the market was also aided by technically related selling pressure after forming a potentially bearish chart pattern on Tuesday. The last price was reported at $1060.50, down $11.10 or -1.04%. Palladium moved lock-step with platinum, dropping to $602.55, down $6.30 or -1.03%.

Both platinum and palladium do not benefit from the safe haven demand that gold possesses, and some respite from improving auto sales is likely helping sentiment. Speculative positioning in the futures market suggests there is some conviction behind the platinum rally, however, most traders believe the supply/demand fundamentals don’t support a long-term rally.