Gold declined after minutes from the Federal Reserve’s last meeting showed some policy makers favored raising U.S. interest rates as soon as June.
“Several participants judged that the economic data and outlook” warrant tightening this quarter, according to minutes of the March Fed gathering released Wednesday in Washington. Higher rates boost the appeal of assets with better yield prospects such as bonds and equities, while cutting the allure of gold, which generally offers returns only through price gains.
The precious metal has fallen out of favor with investors who anticipate that rates will rise this year. Holdings in exchange-traded products backed by gold are at the lowest since mid-January, while U.S. government data shows open interest for New York futures and options has declined in the past two months.
Gold for immediate delivery fell 0.8 percent to $1,199.26 an ounce at 2:39 p.m. New York time, heading for the biggest loss in a week.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, pared losses after the Fed minutes were released. A stronger greenback cuts the appeal of precious metals as an alternative investment.
Split View
The benchmark federal-funds rate has been kept near zero since December 2008. The Fed minutes showed policy makers were split over whether the economy has gained enough traction to warrant tightening in June. The record didn’t identify the participants or give precise numbers of those holding a certain view.
Gold was little changed last quarter as investors tried to gauge when the Fed would start lifting borrowing costs. On Friday, a U.S. government report showed that employers in March added fewer jobs than forecast, fueling speculation that the rate increases would come later. The minutes released Wednesday were of a debate held before those latest job figures were reported.
The metal dropped 29 percent in the previous two years as the dollar surged and inflation remained low. Prices climbed 70 percent from December 2008 to June 2011 partly as the Fed held rates near a record low.
Silver, platinum and palladium also declined in the spot market
January 11, 2016