Gold holds near four-week low on elevated dollar

Gold prices hovered near a four-week low on Tuesday, as a strong dollar countered safe-haven demand fuelled by economic slowdown fears amid prospects of aggressive monetary policy tightening.

FUNDAMENTALS


* Spot gold was up 0.3% at $1,823.69 per ounce, as of 0057 GMT, after falling to its lowest since May 19 at $1,810.90 earlier in the session. U.S. gold futures fell 0.4% to $1,825.20.

* Gold and palladium suffered sharp declines on Monday, as the dollar rallied on bets for steep U.S. Federal Reserve interest rate hikes, eroding the appeal of bullion and other precious metals.

* The dollar still seemed to be the safe haven of choice, steadying near a two-decade high scaled on Monday, and drawing most investors away from greenback-priced gold.

* Asian shares tumbled after Wall Street officially entered bear market territory and bond yields hit a two-decade high on fears aggressive U.S. interest rate hikes would push the world’s largest economy into recession.

* Higher short-term U.S. interest rates and bond yields increase the opportunity cost of holding bullion, which yields no interest.

* Late on Monday, expectations for a 75 basis point hike at the Fed‘s June meeting jumped to 96% from 30% earlier in the day, according to CME‘s Fedwatch Tool. A 75-bp hike would be the biggest since 1994.

* Spot silver dipped 0.9% to $21.68 per ounce, platinum fell 0.6% to $967.67, and palladium dropped 1.3% to $1,909.49.

DATA/EVENTS (GMT) 0600 UK Claimant Count Unem Chng May 0600 Germany HICP Final YY May 0600 UK ILO Unemployment Rate April 0900 Germany ZEW Economic Sentiment June 0900 Germany ZEW Current Conditions June U.S. Federal Open Market Committee starts its two-day meeting on interest rates (to June 15)