Gold moves lower as the dollar and rates go higher

USDCAD Daily

Gold prices edged down on Tuesday as the dollar firmed, with focus shifting to the US Federal Reserve which is expected to hike interest rates and signal three more increases this year at a two-day meeting that kicks off later in the day.

Gold is now selling off as both the U.S. dollar and bond yields go higher.

Meanwhile, the S&P/ASX 200 index traded 0.22 percent lower at 5,912.5 by 02:30 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bearish at -121.32 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend).

In the national capital, gold of 99.9 per cent and 99.5 per cent purity surged by Rs 210 each to Rs 31,390 and Rs 31,240 per 10 grams, respectively.

U.S. gold futures for April delivery settled up $US5.50, or 0.4 per cent, at $US1,317.80 per ounce.

The price of gold has bounced after each of the five previous U.S. rate hikes and is expected to again, said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

While it appears that a rate increase is a foregone conclusion, markets will be looking for clues as to the pace of further monetary tightening this year. The currency is also strengthening on waning risk sentiment, thanks to a brewing political crisis in Japan and the rising risk of a global trade war. All else held equal, gold becomes relatively less attractive as interest rates rise. This was the smallest net long position since early January.

The price of gold has bounced after each of the five previous United States rate hikes and is expected to again, traders said, citing geopolitical risks, uncertainty over an impending trade war and current USA debt levels.

"We have a band of support at US$1,300-US$1,307 - there's the 100-day moving average coming in, there's the previous low and US$1,300 is the big psychological level", Hansen said.

Palladium declined 0.28 per cent to $987.25 per ounce. Platinum for April added 4.2 dollars, or 0.44 percent, to close at 954.4 dollars per ounce.

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