Gold prices declined under the psychological $1,200 per ounce mark as the dollar hit a one month high on signs that US inflation is rising, which would likely mean a raise in interest rates this year.
Gold futures for June delivery on the Comex division of the New York Mercantile Exchange was down $17.7 to $1,186.3 per ounce. Trade has ranged from $1,185 to $1,208.2, while still remaining near the 50-day moving average of $1,197.79.
The dollar was 0.7 percent stronger at $1.0905 against the euro, the highest price for the greenback since April 27. The dollar index was at 97.0460, up 1.1 percent.
On Friday, US April CPI month-over-month was in-line with forecasts of a 0.1 percent increase, while Core CPI month-over-month for April was up 0.3 percent, above the 0.2 percent estimates.
A higher inflation would satisfy the Federal Open Market Committee’s (FOMC) plan on reaching two percent unemployment before raising interest rates. However, Federal Reserve chair Janet Yellen quelled concerns in a speech on May 22 of a rapid rate hike once the Federal Open Market Committee (FOMC) decides to increase interest rates.
“Gold has dropped beneath the psychologically important $1,200 per troy ounce mark as the new week gets underway, finding itself under particular pressure from the significantly firmer US dollar,” Commerzbank said. “This is because the more pronounced rise in the US core inflation rate in April makes it more probable that the Fed will raise interest rates.”
The members of the Fed’s policy board are locked in what has become an increasingly public debate on when will be the right time to raise interest rates, which have been near zero since December 2008. However, Yellen said recent data and continuing inflation should lead to a rate rise sometime this year.
At its last meeting, the Fed removed all calendar references in its forward guidance and said that recent economic weakness might be “transitory” in nature. This means that bank is now entirely data dependent and a rate increase could happen at any future meeting.
In today’s data, US core durable goods orders month-over-month in April was in-line with forecasts of a 0.5 percent increase, while durable goods orders month-over-month was down 0.5 percent, off the estimates of a 0.4 percent decline.
HPI month-over-month in March rose 0.3 percent, off the forecast of 0.7 percent. March S&P/CS composite-20 HPI year-over-year climbed 0.5 percent, above forecasters estimates of a 4.6 percent increase.
While in Japan, May SPPI year-over-year beat analysts expectations with a 0.7 percent rise with the consensus expecting a 0.6 percent increase.
Meanwhile in equities, Germany’s DAX was down 0.9 percent, while France’s CAC-40 rose 0.3 percent.
As for the other precious metals, Comex silver for July delivery was down nearly four cents to $16.660 per ounce. Trade has ranged from $16.645 to $17.180.
Platinum futures for July delivery on the Nymex fell $20.4 at $1,128.20 per ounce, while the most-actively traded palladium contract was at $779.25, down $4.75.
(Editing by Tom Jennemann)
The post Gold drops below $1,200/oz as dollar climbs to 1-month high appeared first on The Bullion Desk.
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