Gold falls as dollar rises and Fed prepares to speak

Gold falls as dollar rises and Fed prepares to speak
Gold falls as dollar rises and Fed prepares to speak

Gold prices fell on Tuesday as the U.S. dollar strengthened, as investors awaited comments from Federal Reserve officials for clarity on the timing of potential interest rate cuts.

Spot gold was down 0.5% at $2,313.11 an ounce, as of 1006 GMT. U.S. gold futures fell 0.4% to $2,321.70 an ounce.

The US dollar index gained 0.2% against its rivals, making gold less attractive to holders of other currencies.

“It (gold) is definitely overbought and some of the profits have been taken out of the market, so it’s in consolidation mode,” said Rhona O’Connell, an analyst at StoneX.

“I still think the headwinds, particularly around geopolitical risk and potential strains in the banking system, are strong enough to support gold rather than reversing the moves we’ve seen across the margin until April.

Gold hit a record high of $2,431.29 on April 12 due to heavy buying by central banks and demand from Chinese investors amid growing geopolitical tensions.

China’s central bank added 60,000 ounces of gold to its reserves in April, its data showed, extending the period of consecutive purchases to 18 months despite high gold prices.

Investors are now eagerly awaiting comments from Fed officials scheduled to speak this week, including Fed Bank of Minneapolis President Neel Kashkari later today.

Richmond Fed President Thomas Barkin said Monday that the current level of interest rates should cool the economy enough to bring inflation back to the central bank’s 2% target.

According to the CME’s FedWatch tool, Fed funds futures traders give a greater than 67% chance that the U.S. central bank will begin cutting interest rates in September.

Lower interest rates reduce the opportunity cost of holding bullion without yield.

Elsewhere, spot silver was down about 1% at $27.18 an ounce. Platinum was stable at $952.59, while palladium lost 0.6% to $971.50.

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