Singapore: Gold retained two days of losses to trade near a four-week low on Wednesday, below $1,300 an ounce, on a stronger dollar and fears that the Federal Reserve could hike US interest rates sooner than expected.
Fundamentals
Spot gold was little changed at $1,295.76 an ounce, after losing 3.3 per cent in the last two sessions - the metal's biggest two-day loss since October. Fed Chair Janet Yellen said on Tuesday US labour markets are far from healthy and signalled the Fed will keep monetary policy loose until hiring and wage data show the effects of the financial crisis are ‘completely gone’.
However, Yellen said the one thing that might prompt the central bank to raise rates earlier or faster is if hiring and wages take off in an unexpected way. Higher rates would encourage investors to withdraw money from non-interest-bearing assets such as gold.
Meanwhile, a strengthening US economy and job market means the Fed should begin raising interest rates "relatively soon," Kansas City Federal Reserve Bank President Esther George said on Tuesday.
George said by many measures, including a recent rise in rent and food prices, and strong hiring reports, the Fed should have already lifted interest rates from the zero level. Investors were eyeing demand in the physical markets to see if the price drop below $1,300 has prompted buying. Physical demand has been immune to the recent price declines, with major buyers China and India holding off.
