Fed Rate Increase Remains Possible Sending Gold Lower

Gold fell hard on Monday to trade at 1267.75 giving up over $26 while oil prices fell 447 points to 17.08. The hardest hit metal was platinum which fell over $37 to 1047.95. There was little on the economics calendar or in the headlines to change global markets. Metal traders decided to book profits after gold was unable to break the resistance at $1300. The Bears just tired out the Bulls as prices turned downwards. The US dollar gained on comments from Fed speakers who all seemed to indicate that the Fed were still looking at rate increases as soon as June. Gold prices fell through $1270 per ounce for the first time in 5 trading sessions retreating as the Dollar rallied on the FX market following Friday’s weaker than expected US jobs data.

After the official non-farm payrolls report said the US economy added the fewest jobs in seven months in April, weak international trade data from China today saw the greenback rebounded to the highest levels in almost 2 weeks on its trade-weighted index against other major currencies.

According to Bloomberg bullion has benefited this year from expectations that slowing global economies will restrain the pace of U.S. rate increases. Lower borrowing costs boost gold’s appeal against interest-bearing assets such as bonds. Three of the world’s most influential bond investors warned against counting the Fed out even after Friday’s jobs report, helping damp gold’s rally.

“Gold is really getting whacked this morning,” Phil Sterile, a senior market strategist at RJO Futures in Chicago, said in a telephone interview. “The Fed will raise rates eventually, and if we see stronger employment data next month, then maybe you’d see them raise rates in July.”

Bill Gross, who runs the Janus Global Unconstrained Bond Fund, said policy makers may act at their next meeting in June. Mohamed El-Erian, the chief economic adviser at Allianz SE, said the Fed may move twice this year and Mark Kiesel, the chief investment officer for global credit at Pacific Investment Management Co., echoed the comments.

Traders put odds that the Fed will raise rates this year at less than 50 percent, down from more than 90 percent at the start of January. Today the precious metal may be influenced by the remarks by Charles Evans, Fed President for Chicago and also a FOMC member. He is scheduled to speak at 9:10 GMT.

Last Friday the Federal Reserve President for New York, William Dudley, noted that it was still reasonable to anticipate 2 hikes in borrowing costs in 2016, in spite of the weakest US employment growth since September 2015

Gold holdings in exchange-traded products expanded 6.3 metric tons to 1,799.6 tons as of Friday, the highest since December 2013, data compiled by Bloomberg show.