On Wednesday, gold prices down to a four-week low as concerns over the possibility of an interest rate hike drove nervous investors to close out bets on the precious metal. Traders also worry about Federal Reserve Chair Janet Yellen’s speech on Friday which may give clues into the timing of U.S. interest-rate increases.
Gold for December delivery was recently decreased 1.35% to $1,327.90 per troy ounce on the Comex division of the New York Mercantile Exchange, on track for its biggest one-day loss since Aug 5. Gold Price hits the lowest level since July 27 earlier in the session.
Janet Yellen will speak at the annual monetary-policy symposium in Jackson Hole, Wyoming. The next Fed policy decision will be announced Sep 21. Gold fell for the third time in four sessions, and traded below its 50-day moving average price or the first time since June.
“To prepare, investors have been dialing down bullish bets on gold ahead of Friday.” said Peter Hug, global trading director at Kitco Metals. “People are probably positioned a little longer than they want to be. They don’t want to get caught and so they are taking a little bit off the table.”
According to Fed Funds data, the odds of a U.S. rate increase by the end of this year were at 53% which increased from 36% at the beginning of August. The boards of directors at eight of the 12 regional Fed banks sought last month to increase the rate on direct loans from the Fed to 1.25% from 1%, the central bank said Tuesday. The votes can signal whether a bank’s president favors a change in the main policy rate.
Gold has risen over 25% year to date, as the central bank has pushed back expectations for a rate increase and investors have sought out safe-haven assets. Higher rates tend to weigh on gold, since the metal pays its holders nothing and struggles to compete with yield-bearing assets such as Treasurys when borrowing costs rise.
A stronger dollar also hurt gold prices, with the US Dollar Index up 0.24% to 94.76 on Wednesday. Gold is priced in the U.S. currency and becomes more expensive to foreign buyers as the dollar rises.