US gold futures closed at a two-week low on Tuesday, as the market saw further speculative liquidation under $430 an ounce before an as-expected decision on US interest rates. Traders were reluctant to boost gold, despite a soft dollar, as they awaited an anticipated quarter percentage point increase in rates by the Federal Reserve to 3 percent, which came after gold settled. Gold for June delivery on the New York Mercantile Exchange's Comex division ended down $2.80 at $427.70 an ounce, after trading from $431.40 to $427.30, its lowest since April 15.
Fund-based pressure continued for a second day after futures fell 1.3 percent on Monday amid overbought conditions and ahead of the Fed decision today, traders said.
The Fed raised benchmark rates for the eighth straight time and, in an accompanying statement, retained its commitment to a "measured" pace of further increases.
Rising rates usually support short-term US assets and, as a result, weigh on gold prices because bullion is mostly dollar-denominated. "I think we're going lower," said Leonard Kaplan, president of Prospector Asset Management, pegging first major support at $400.
"Assuming the Fed continues to raise rates at a measured pace this year, I think the dollar is going to rally, and that means gold falls." In currencies, the euro was last quoted at $1.2866.
Spot gold changed hands at $426.45/7.20 an ounce, below on Monday's closing level in New York at $429.25/430.00. The London afternoon fix was at $427.90.
Natexis Commodity Markets said in a metals report that the downside for gold remains limited, and prices should stay above $400 as physical off-take kicks in at cheaper prices.
Natexis is forecasting an average gold price at $430 this year and $400 in 2006. Silver edged higher on mild speculative short covering after futures previously dropped to a 2-3/4-month low.
July silver rose 0.8 cent to $6.883 an ounce, after moving between $6.82 and $6.915. On Monday, July sank to its weakest since February 9 at $6.81.
Natexis viewed the Gary metal as focused on the dollar's moves and tracking gold and the base metals. It forecast silver will average $6.90 an ounce in 2005 and perhaps fall below $6.00 next year. Spot silver reached $6.83/86, hardly changed from the last New York close at $6.83/85. The fix was at $6.85. July platinum inched down 10 cents to $869.90 an ounce.
Spot platinum was at $865/868. June palladium fell $1.95 to $191.70 an ounce the lowest settlement for futures since March 2. Spot palladium traded to $191/194.
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