Gold retreated on Monday, after posting its biggest weekly gain in two months, amid expectations the US Federal Reserve is moving closer to raising interest rates. The Fed holds a policy meeting this week and a recent spate of data that points to a strengthening economy could sharpen the case for the central bank to take a more hawkish stance.
The latest upbeat evidence came on Friday when the Thomson Reuters/University of Michigan index of consumer sentiment jumped to a near eight-year high in December. There is speculation in the market that the Federal Open Market Committee (FOMC) might remove the phrase "considerable time" in its statement after the meeting with regard to the timeframe for raising interest rates, said Howie Lee, investment analyst at Phillip Futures.
"If they were to remove that phrase, I think they're trying to prepare the market for an eventual rate hike and that could send gold further down," said Lee, who pegs support for bullion at $1,140. The FOMC is expected to release a statement at the end of its two-day meeting on Wednesday, its last for the year, followed by a news conference by Fed Chair Janet Yellen. Spot gold was down 0.3 percent at $1,218.80 an ounce by 0638 GMT. The metal climbed 2.6 percent last week, its largest such rise since October. A hike in US interest rates curbs appeal of non-interest bearing assets such as gold.
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