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Gold reverses gains after Fed raises rates

Reuters  |  NEW YORK/LONDON 

By and Peter Hobson

NEW YORK/LONDON (Reuters) - Gold prices turned lower on Wednesday after the announced it was raising interest rates.

The Fed's move was widely expected but marked a milestone in the U.S. central bank's shift from policies used to battle the 2007-2009 financial crisis and recession.

Spot gold lost 0.1 percent at $1,294.73 per ounce by 2:25 p.m. EDT (1825 GMT), after earlier hitting $1,292.15, its lowest since June 5. U.S. gold futures for August delivery settled up $1.90, or 0.2 percent, at $1,301.30 per ounce.

The U.S. dollar strengthened against a basket of major currencies, pressuring gold. <.DXY> [USD/]

Interest rate hikes push up bond yields, making non-yielding bullion less attractive. They also strengthen the dollar, increasing the cost of gold for buyers using other currencies.

In raising its benchmark overnight lending rate a quarter of a percentage point to a range of between 1.75 percent and 2 percent, the Fed dropped its pledge to keep rates low enough to stimulate the "for some time" and signalled it would tolerate above-target inflation at least through 2020.

"We're seeing a pretty solid in the U.S., so there's not a lot of reason for them to put off raising rates," said Rob Haworth, for Wealth Management.

The Fed has raised rates seven times since late 2015 on the back of the economy's continuing expansion and solid job growth, rendering the language of its previous policy statements outdated.

Fed policymakers projected a slightly faster pace of rate increases in the coming months, with two additional hikes expected by the end of this year, compared to one previously.

Investors expect policy announcements from the (ECB) on Thursday and Japan's on Friday, which could affect gold prices.

The ECB is expected to signal a wind-down of its huge bond-buying programme, which could strengthen the and boost demand.

In other precious metals, silver lost 0.3 percent at $16.80 an ounce after hitting a seven-week high of $16.99.

gained 0.1 percent at $894.49 per ounce, after dropping to $887.50, an eight-day low. Palladium dropped 0.9 percent at $1,009.22 per ounce after dipping to $997.15, its lowest since June 6.

(Additional reporting by and in Bengaluru; Editing by and Tom Brown)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, June 14 2018. 00:15 IST
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