Among other precious metals, platinum slid for a fifth session out of six on fears that demand from the auto sector, where the metal is used in diesel catalysts, could take a hit following the Volkswagen emissions scandal.
“The Japanese came in aggressively on the bid this morning, taking the white metal more than $20 higher”, said MKS Group trader Jason Cerisola. The projections released along with the statement suggest a few Fed members want to delay raising rates into next year, although most still continue to predict a rate hike by the end of 2015.
Gold futures settled lower for a second straight day on Tuesday, as the dollar ticked higher on expectations that the Federal Reserve will raise benchmark interest rates sometime this year. It fell to $924.50 earlier this week, its lowest since January 2009. Gold prices were also falling because the stronger dollar is weighing it down, and even Platinum fell to a six-and-a-half-year low. Prices have rebounded about 7 percent since then as tepid global growth prompted the Federal Reserve to hold off on raising interest rates. The biggest thing that the Federal Reserve said last week was simply that the decision to raise the rates was simply postponed, and that it was not a definite decision for the rest of the year.
This echoes the sentiment of Linn & Associates broker Ira Epstein, who told the Journal yesterday that a rate rise is still likely either in October or December, which will act as a drag on any rally.
European shares climbed zero.6 % on Monday, whereas the greenback rose towards a basket of currencies after hypothesis that different main central banks might ease coverage after the Federal Reserve delayed an rate of interest hike. However, the United States central bank has also said it would move to increase rates later this year for the first time in nearly a decade.
“The retreat in equities plus the continued decline in U.S Treasury yields helped encourage buying in gold“, said HSBC analyst James Steel.
A move to increase rates will put fresh downward pressure on commodities and especially gold, which does not pay an income and so would look increasingly unattractive compared to other assets.