Gold declines as dollar strengthens
Gold continued its decline after being weighed down by a strong US dollar, as investors weighed hawkish comments from Fed policymakers about the possibility of monetary expansion this year.
Bullion was steady in early Asian trading, following a 0.4 percent decline in the previous session. Minneapolis Federal Reserve Bank President Neel Kashkari said Tuesday the central bank is likely to keep interest rates where they are “for a long time” and refused to rule out future increases.
Since gold is priced in U.S. currency and does not pay interest, both high rates and a strong dollar are a negative for gold.
Investors were also monitoring new tensions in the Middle East after Israeli forces took control of Gaza’s Rafah border crossing on Tuesday ahead of a possible attack on the city. A further increase may benefit gold, which is a safe asset.
On the other hand, China’s central bank increased its gold reserves for the 18th consecutive month in April, but the slowdown in purchases could eliminate an important support pillar for the precious metal.
Bullion is up nearly 12 percent this year, driven in part by strong demand from central banks and Chinese consumers. Conflicts in the Middle East and Ukraine also supported port demand.
Spot gold was seen little changed at $2,315.11 per ounce at 08:21 Singapore time. The Bloomberg Dollar Spot Index rose 0.1 percent after gaining 0.2 percent on Tuesday. While silver and palladium were trending horizontally, platinum was on the rise.