Gold prices fall as dollar hits 20-year high

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Gold prices fall as dollar hits 20-year high

On Tuesday, Reuters gave up small gains in range-bound trading, as the climb resumed and hit a 20-year high, eroding bullion's safe-haven appeal on investor bets of aggressive rate hikes by the U.S. Federal ReserveFederal Reserve.

Spot gold fell 0.4% to $1,811. U.S. gold futures fell 1% to $1,813, while the per ounce was at 80 per ounce by 12: 33 p.m. EDT 1633 GMT. The main thing driving gold right now is the anticipation of a very aggressive Fed when it comes to rates tomorrow, according to Bob Haberkorn, senior market strategist at RJO Futures.

The dollar went up against a basket of currencies to reach a new two-decade high, making gold expensive for overseas buyers. This is still looking like a tough environment for gold, but it will eventually resume that safe-haven role. Edward Moya, senior analyst with OANDA, said: "We just need to get beyond this strong dollar.

Expectations for a 75 basis point hike at the Fed's two-day policy meeting jumped to 96%, according to CME's Fedwatch Tool. Since 1994, the opportunity cost of holding non-yielding bullion would be increased. The Labor Department said that the Producer Price Index for Final Demand increased by 0.8% in May, after advancing 0.4% in April.

The success or failure to combat inflation before the economy begins to suffer is a major theme and will determine the ultimate direction of gold, said Ole Hansen, a Saxo Bank analyst.

Silver fell 0.7% to $20.91 per ounce, platinum fell 1.4% to $919.65, while palladium rose 0.7% to $1,809.