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Gold was trading close to its lowest in over a week on Monday after Federal Reserve Chair Janet Yellen said that the US central bank was poised to hike interest rates this year and as the dollar strengthened to its highest in a month.
Spot gold had slipped 0.2 per cent to $1,203 an ounce by 0032 GMT, close to $1,201.20, the metal’s lowest since May 13 reached in the previous session.
Fed rate hike
The Fed’s Yellen was clearer than ever on Friday that the central bank was poised to raise interest rates this year, as the US economy was set to bounce back from an early-year slump and as headwinds at home and abroad waned.
Yellen spoke amid growing concern at the Fed about volatility in financial markets once it begins to raise rates, and a desire to begin coaxing sceptical investors towards accepting the inevitable: that a 6-1/2-year stretch of near-zero interest rates would soon end.
Bullion investors believe higher rates would dent the demand for non-interest-paying gold.
Dollar rises to 1-month high
The prospect of higher rates also boosted the dollar, diminishing gold’s appeal as a safe-haven.
The greenback rose to its highest in a month on Monday against a basket of major currencies, supported by Yellen’s comments and US inflation data.
Rising shelter and medical care costs boosted underlying US inflation pressures in April.
In other industry news, hedge funds and money managers hiked a silver net long stance to a near 10-month high and boosted their bullish gold bet to its biggest since March during the week ended May 19, US Commodity Futures Trading Commission data had showed on Friday.
Gold jewellery demand
Indian gold jewellery demand in the second half of the year could take a hit as the Hindu calendar shows the number of dates seen as being auspicious for weddings will drop 40 per cent in the second half from a year earlier.
Russia and Kazakhstan raised their gold holdings in April as the price of gold steadied, while Jordan entered as a steady buyer earlier this year, data from the International Monetary Fund had showed on Friday.
Liquidity is likely to be thin on Monday as the COMEX is closed for the US Memorial Day holiday.
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