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Yellow metal loses sheen on Fed rate hike jitters

By Religare
|

Gold futures ended lower on Friday as a stronger dollar cut the demand for the precious metal as an alternative asset while upbeat US economic data fueled speculation of the Federal Reserve moving closer to raising interest rates for the first time in nine years, curbing the lure for the bullion as a store of value.

Stronger greenback makes Gold more expensive for those holding other currencies, thus dimming demand.

 

US producer prices rose for the third month on the trot, up by 0.2 per cent in July from June, while American factories boosted production at a swifter pace in July, signaling a pickup in the world's biggest economy, bolstering the case for policy tightening in the near term.

Meanwhile, gains in equities signaled a return of risk taking appetite as concerns over China eased after the People's Bank of China raised the Yuan's reference rate by 0.05 per cent following three devaluations of over 1 per cent each earlier in the week, dimming the safe haven appeal for Gold.

The bullion may extend a slide today as traders weigh the chances of a possible interest rate hike by the Fed in September amidst a return to calm at currency markets after China's policymakers helped stabilize the currency following a severe rout last week.

At the MCX, Gold futures for October 2015 contract closed at Rs 25,768 per 10 gram, down by 0.49 per cent after opening at Rs 25,825, against the previous closing price of Rs 25,895. It touched the intra-day low of Rs 25,740.

Story first published: Monday, August 17, 2015, 12:30 [IST]
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