Gold prices fell to a one-week low on Tuesday on speculation that the eventual successor to US Federal Reserve Chair Janet Yellen will favour higher interest rates. Spot gold was down 0.7 percent at $1,285.40 an ounce as of 1417 GMT, while US gold futures for December delivery slipped 1.2 percent to $1,286.80 per ounce.
"It's partly (the possibility of a hawkish Fed chair) and that the Fed is going to and needs to hike rates this year that is contributing to a bullish dollar environment," Martin Arnold, commodities analyst at ETF Securities, said. US President Donald Trump was favouring policy hawk John Taylor as the next head of the Fed, Bloomberg reported, pushing the dollar higher and lifting US Treasury yields. Taylor, a Stanford economist, is seen as more likely to raise rates than Yellen, which would boost the dollar and dent gold and US Treasuries.
The Fed will probably need to raise rates in December and then three or four times "over the course of next year", assuming US unemployment continues to fall and inflation rises, Boston Fed President Eric Rosengren said. Gold's generally loses some of its in appeal when interest rates are higher as it yields no interest.
Palladium, used mainly in auto catalytic converters, rose 1.8 percent to $990 an ounce, after hitting its highest since February 2001 in the previous session. Analysts are wary about the price of palladium overheating in response to higher demand in the world's biggest auto market, China, and an expected supply deficit this year.
"While fundamentals in palladium are good, they are not supportive of the kind of gains we have seen this year," Arnold said. "Palladium is looking well and truly overdone." Raising political tensions, Iraqi government forces captured the Kurdish-held oil city of Kirkuk on Monday, responding to a Kurdish referendum on independence with force and transforming the balance of power in the oil-producing country. Silver fell 0.5 percent to $17.10 an ounce while platinum was 0.6 percent lower at $923, having touched a one-week low.
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