Gold Prices Range Bound As Other Metals Perk Up
Gold traders remain sidelined regardless of the headlines each day saying gold is up or down. The fact is gold has been bouncing in a very tight trading range remaining smack in the center this morning at 1083.60. Analysts said a weak trend in the overseas markets following a possible rate hike by the US Federal Reserve, lifting dollar to a four-month high, eroding demand for the precious metals as an alternative, weighed on gold prices at futures trade here. Silver dipped 3 points to 14.55 while platinum added $1.50 to 951.75.
Gold prices are hovering around a 5-1/2-year low of $1,077 an ounce hit in late July. Prices could fall below $1,000 in the next few months as the U.S. Federal Reserve is likely to raise interest rates. Higher U.S. interest rates would increase the opportunity cost of holding gold, an asset that does not earn interest. Gold is typically regarded as a good investment in times of financial and economic uncertainty.
Gold slipped toward a 5-1/2-year low on Wednesday as the dollar strengthened after comments from a Federal Reserve official backed expectations that the U.S. central bank would hike interest rates as early as next month. Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, dropped further on Tuesday to 21.56 million ounces, the lowest since September 2008. The SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, is holding 670.62 tonnes as per latest available data on their website.
The US dollar extended gains against the yen and euro after Atlanta Federal Reserve President Dennis Lockhart expressed support for an interest rate hike in September. Lockhart, a voter this year on the Federal Open Market Committee, told the Wall Street Journal that it would take “significant deterioration” in the U.S. economy for him to not support a rate hike in September. After three days of sharp declines, U.S. Treasury yields jumped on Lockhart’s comments and supported the dollar.