Gold Slips To The Bottom Of Its Trading Range

Precious metals traded in the red on Wednesday morning giving back most of the gains from earlier this week as gold remained dead center of its trading range. Gold dipped $5.40 to trade at 1085.30 as the greenback began its rally late in the session on Tuesday. Silver took cues from gold to dip to 14.49 and platinum fell to 951.65.

The US dollar surged to 98.22 adding 18 points on Wednesday morning.  Gold eased near a 5-1/2-year low 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.

Atlanta Federal Reserve President Dennis Lockhart has said it would take “significant deterioration” in the U.S. economy for him to not support a rate hike in September, according to the Wall Street Journal.

Gold, an asset that does not earn interest, has taken a hit given rising risks of a U.S. rate hike. The Fed looks intent on lifting rates this year for the first time since 2006 as the U.S. economy strengthens, particularly its labour market.

Recent evidence of a recovering U.S. economy, new orders for U.S. factory goods rebounded strongly in June on robust demand for transportation equipment and other goods.

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. Platinum and palladium wallowed near multi-year lows on a global glut and weak demand from the automotive sector.

The Fed’s rate hike remains the key focus for gold investors,’’ with Lockhart’s comments increasing speculation the central bank will move in September, said a market analyst. “Friday’s nonfarm payroll data may provide further insight.”

Higher borrowing costs curb the appeal of gold, which doesn’t pay interest. A gauge of the dollar’s strength advanced for a third day on Wednesday to the highest level since March, cutting demand for the metal as an alternative investment.

U.S. jobs are forecast to have expanded by 225,000 in July, providing further evidence of the recovery in the world’s largest economy, according to the median estimate of 90 analysts surveyed by Bloomberg. That compares with 223,000 in June.

In other metals copper remained in the red falling 8 points heading back to its lows at 2.344. Much of the selling has been triggered by worries about economic growth and demand for copper in China, which accounts for about half of global consumption estimated at around 22 million tonnes this year. Industrial metals slid across the board, surrendering gains posted Tuesday after people familiar with the matter said China was planning at least 1 trillion yuan in bonds to fund construction projects amid a struggling economy.