Gold dropped for a third day to trade at the lowest level in almost two weeks as the dollar rebounded and investors await policy reviews in Japan and the U.S.
Bullion for immediate delivery declined as much as 0.8 percent to $1,225.77 an ounce, the lowest since March 2, and was at $1,229.25 at 10:05 a.m. in Singapore, according to Bloomberg generic pricing. The metal is up 16 percent in 2016.
Gold’s gain this year has been pared as risk appetite returns to financial markets and the Bloomberg Dollar Index advanced from the weakest since October, diminishing the appeal of the yellow metal as a store of value. The Bank of Japan’s review Tuesday, to be followed by a policy decision from the U.S. Federal Reserve on Wednesday, comes after Japan’s surprise shift into negative rates in January, and last week’s unprecedented stimulus from the European Central Bank.
“We’re looking at defensive action before these key meetings,” Ric Spooner, chief analyst at CMC Markets in Sydney, said by phone. “The market has a cautious tone towards the Bank of Japan, they’re not expecting any action, but they tend to be a little bit cautious of outlier action given the BOJ has surprised the market on previous occasions.”
“But the thing that really is exciting the gold market most is probably the Fed meeting,” said Spooner. “Again, whilst no action is anticipated, it’s possible that we could see the Fed beginning to prepare the market for a mid-year rate hike.”
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Traders are pricing in a 52 percent chance that the Fed will raise rates in June, up from 6 percent a month ago, according to Fed fund futures data compiled by Bloomberg. Higher rates hurt demand for gold, which becomes less competitive against interest-bearing assets.
- Holdings in exchange-traded funds backed by gold fell after reaching the the highest since July 2014. Assets dropped 5.3 metric tons to 1,733 tons on Monday, according to data compiled by Bloomberg.
- Spot silver declined 0.2 percent to $15.3145 an ounce, platinum lost 0.4 percent and palladium 0.7 percent.
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