Gold Threatens $1,200 Level Amid Fed Rate Hike Bets
Gold futures fell on Monday, moving inversely to the US dollar, which continues to benefit from last Friday’s comments from Fed Chair Yellen, who said a rate hike could happen “in the coming months”.
Gold remains very sensitive to rate hike expectations, as they tend to lift the greenback and weigh on dollar-priced metals. USD/JPY reached a fresh monthly high of 111.44 earlier on the day, evidencing dollar's strength.
Meanwhile, as commodities don’t pay interest, higher rates could prompt investors to get rid of gold and turn into higher-yielding assets such as bonds.
Expectations of another rate hike by the Fed has kept the yellow metal on the defensive over the last month. However, the metal is holding above the $1,200 an ounce level. It was last trading down 0.69% on the day at $1,208 an ounce. Gold has lost around 7% lower since the beginning of May.
On Monday, US markets are closed in observance to the Memorial Day, assuring thin conditions and little action in financial markets.