Gold slips on technicals as US dollar firms on US rate hike cues

[BENGALURU] Gold fell on Wednesday in the face of technical resistance and positive economic data that boosted expectations for further US interest rate hikes this year, supporting the dollar and equities markets.

"A resurgent US dollar, along with higher US yields and equities has taken the momentum out of the gold rally for now," said Jeffrey Halley, senior market analyst at Oanda.

The metal was also under pressure after failing to break through its 200-day moving average at US$1,260, Mr Halley said, posting its second consecutive down day in Asia.

Spot gold was down 0.3 per cent at US$1,248.32 per ounce at 0325 GMT. US gold futures slipped 0.6 per cent to US$1,247.9.

The US dollar pulled away from 4-1/2-month lows against a currency basket on Wednesday as solid data backed expectations for more US interest rate hikes this year.

Reinforcing rate hike expectations, US consumer confidence index hit 125.6 in March, surpassing expectations for a reading of 114 and much higher than 116.1 in February. The March level marked the highest since December 2000.

US Federal Reserve vice-chairman Stanley Fischer also gave the US dollar a lift as he said in a television interview that two more increases to US overnight interest rates this year seemed "about right".

"Perhaps the expectations of a June rate hike have gone up, given the recent statements from the central bank officials," said Jiang Shu, chief analyst at Shandong Gold Group.

The yellow metal was likely to continue the downward momentum through Wednesday to around the US$1,235 an ounce level, he added.

A strong greenback makes US dollar-denominated gold more expensive for holders of other currencies, potentially decreasing demand.

Meanwhile, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, which is considered a gauge of investment demand, reported an outflow of 1.8 tonnes on Tuesday.

Gold prices could continue to be slightly pressured into the next month or so, especially as the market awaits key economic data from the United States for further clarity on US interest rate hikes, Mr Shu said.

Gold bullion investment will rise for the fourth straight year in 2017 as global political and economic factors are forecast to maintain buying interest, CPM Group said on Tuesday.

In other precious metals, spot silver fell 0.6 per cent to US$18.04 per ounce. The metal hit US$18.24, the highest since March 2, in the previous session.

Platinum rose 0.6 per cent to US$952.90 per ounce, while palladium prices were down 0.6 per cent to US$787.50 an ounce.

REUTERS