Gold futures dropped to an 8-month low while the dollar rose to a 4-year peak after indications from the Federal Reserve that it would raise interest rates earlier than estimated.
On Wednesday, the Fed renewed the pledge of keeping the interest rates low for a “considerable time”, however, the new outlook suggested that officials were preparing for a faster increase in the interact rates than they had expected after the release of the last projections in June.
Reuters reported that spot gold dropped to the lowest from January 2 at $1,216.01 per ounce on Thursday and was unchanged at $1,222.54 on the day. In the last session, the metal had declined 1%.
Ross Norman, Sharps Pixley CEO said, “The dollar did its job again and gold wiped out the entire eight months’ gains and we are now back where we were at the beginning of the year.”
He added, “Even though the fourth quarter is the traditional strong period for physical demand, I don’t see the market going significantly higher or lower. I wouldn’t be surprised to see prices around $1,230/$1,240 at the end of the year.”
As reported by Bloomberg, December delivery gold futures dropped 1.2% to $1,220.90 per ounce in New York on the Comex, heading to the lowest loss from September 2. The prices reached $1,216.30, the lowest price since January 6.
Broker at Newedge Group, Tommy Capalbo said, “There is no interest in gold at a time when it’s clear that rates are going to start rising. The economy is growing, and people don’t need a safe haven.”
Gold prices are set to stand at an average of $1,270 per ounce this year, dropping from $1,410 in 2013 and they should bottom out in 2015 from $1,170 to $1,200.
Dealers said that any support for prices might come from a rise in Asia’s physical demand, since any drop towards $1,200 per ounce will attract bargain hunters.
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