Gold prices dropped to a five-week low during European morning hours on Wednesday, as traders bet on a strong likelihood the Federal Reserve will raise rates at its upcoming policy meeting next week.
Comex gold futures touched a session low of $1,212.50 a troy ounce, a level not seen since February 3. It was last at $1,213.15 by 8:10AM ET (13:10GMT), down $2.75, or about 0.2%.
Spot gold was down $2.40 at $1,213.40 per ounce.
Markets dramatically adjusted expectations for U.S. interest rate hikes this year following hawkish comments from several top Fed officials last week, including Chair Janet Yellen.
Odds of a second rate hike in September currently stand at about 65%, while a third hike in December is priced in at 53%, aligning market expectations with the Fed‘s current forecast for three rate hikes in 2017.
The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar in which it is priced.
Investors are now awaiting Friday’s nonfarm payrolls report for further clues on the likely pace of hikes this year.
Source: UK Investing.com