Stocks & Precious Metals Fall On Rate Fears

Gold continued to bottom as the greenback rises. In the Asian session on Tuesday gold fell to 1247.55 down by almost $4 as a barrage of Federal Reserve speakers took a hawkish tone telegraphing a possibility of a rate increase as early as June or at its July meeting.  Silver took cues from the overall precious metal group to fall 73 points to 16.35 while platinum remained flat after taking a harsh fall on Monday. Platinum is trading at 1013.35 in the morning session. Asian shares fell to near 10-week lows this morning as investors were worried about the likelihood of a US interest rate increase in coming weeks.

MSCI’s broadest index of Asia-Pacific shares outside Japan slid 0.4 per cent, taking its losses to nearly 5 per cent so far this month and nearing its lowest levels since March 9. “The market seems to be taking a cautious stance ahead of the Fed Chair Janet Yellen’s speech later this week,” said Jung Sung-yoon, a foreign exchange analyst at Hyundai Futures.

The Hindu Business Line said that A string of comments in recent weeks by Federal Reserve officials and minutes of the last Fed meeting have put a possible rate hike firmly on the table for June or July, reviving the dollar but cooling appetite for riskier assets, even if markets are not totally convinced a tightening will come so soon.

Philadelphia Fed President Patrick Harker had said on Monday that a hike in June is appropriate unless data weakens, while St. Louis Fed President James Bullard said holding rates too low for too long could cause financial instability. Fed Chair Janet Yellen will appear at a panel at Harvard University on Friday, a day on which investors will also see the second estimate of US first-quarter growth. Markets also await comments from other Fed officials this week, as well as data on new home sales, durable goods orders and consumer sentiment.

San Francisco Fed President John Williams said the central bank is on track to hike rates in June or July despite risks such as a “Brexit” vote, and will continue with even more increases next year given U.S. economic strength, a top Fed official said on Monday. U.S. rates being kept too low for too long could cause financial instability in future and stronger market expectations for a rate rise are “probably good”, St. Louis Federal Reserve President James Bullard said on Monday.

Goldman Sachs economists said on Monday they estimated a 35 percent chance the Federal Reserve would raise its target on the federal funds rate at its June 14-15 policy meeting.

With economic growth across emerging markets showing fresh signs of flagging — ratings agency Moody’s growth in G20 emerging markets to ease to 4.2 per cent in 2016 compared with 4.4 per cent last year — investors are growing more bearish on the outlook for stocks.

Shares in China and Japan led regional markets down with 0.7 per cent losses each, though some investors were wary of chasing markets lower after their recent retreat.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.38 percent to 872.52 tonnes on Monday.