Gold prices remain near three-month lows on Tuesday as investors are starting to show renewed expectations that the Federal Reserve will begin raising interest rates in June and as the dollar marked a new 11-year peak.
Bullion for April delivery dropped almost 0.6 percent to $1,159.85 an ounce, the worst level not seen since Dec. 1. Gold saw a decline of 2.6 percent on Friday after a report showed the unemployment pace fell to a seven-year low. A seventh straight fall is the biggest streak since May 2013.
Gold came in under pressure after Friday’s strong U.S. nonfarm payrolls data that increases the chances of a Fed hike later this year. Federal Reserve policymakers who kept their benchmark interest rate near zero since December 2008 have begun signaling that they are prepared to raise rates in 2015, with the market expecting it happen sometime between June and September.
“Gold will continue to be weighed down near term by the strong U.S. payrolls from Friday,” said ANZ analyst Victor Thianpiriya.
Higher rates could decrease appetite for assets that do not pay interest such as gold, and benefit the greenback, which on Tuesday scaled its best since September 2003 versus key counterparts, dampening safe-haven demand in gold.
“We expect gold to remain suppressed and to consolidate as a lack of economic release and the stark reality of a rate hike push prices south,” Howie Lee, an investment analyst at Phillip Futures Pte, wrote in a note. Prices may be supported at $1,150 an ounce, he said.
Comments from a top Fed official increased concerns related to a rate hike. Federal Reserve Bank of Dallas CEO Richard Fisher said the U.S. central bank should promptly end its long-running bond-purchase program and move forward with an interest rate hike. He warned that delaying higher borrowing costs risks throwing the U.S. economy off balance.
Fed policy makers are scheduled to meet March 17-18. The dollar index, which tracks the greenback against a basket of 10 major currencies, was 0.4 percent higher on Tuesday to extend four-day winning streak.
To decide about their next move, investors were keeping their focus on talks over the Greek debt crisis, where lingering ambiguity could provide support to safe-haven bullion.
Finance experts from Greece are expected to start discussions about economic reforms on Wednesday with international lenders.
The ECB’s Governing Council is scheduled for a teleconference on Thursday to discuss expanding asset purchase program for Greek banks.
“Unless the situation surrounding Greek’s debts take a huge turn for the worse, the bearish sentiment engulfing gold currently will likely triumph over any mild safe haven appeal the precious metal is exhibiting,” said Howie Lee, analyst at Phillip Futures.
