Gold Prices Fall on Stronger Dollar, Fed Rate Expectations

On the New York Mercantile Exchange, platinum futures for October delivery slid 1.8 percent to $992.40, and palladium futures for December delivery dropped 0.8 percent to $577.15 an ounce.

A top Federal Reserve policymaker said the data on the USA jobs market was “good” and did not change the outlook for monetary policy.

Economists surveyed by Bloomberg expect a government report Friday to show the US added more than 200,000 jobs for a fourth straight month in August.

Last month’s rally in gold came as “Fading expectations of a September Federal Reserve rate hike, the decline in the dollar index [and] the approaching peak seasonal demand period further supported prices“, says a report from commodities analysts at French investment and bullion bank Societe Generale. Doubts over whether the Fed will raise rates at its September 16-17 policy meeting have resurfaced in light of persisting market turbulence in recent weeks.

Overnight, gold futures plummeted on Thursday as the dollar surged against the euro, after the European Central Bank left interest rates at record lows while providing strong hints that it will use all the tools necessary to stimulate the economy and boost inflation throughout the Eurozone.

The metal has benefited from ultra-low interest rates, which cut the opportunity cost of holding bullion while pressuring the dollar.

“The market has already assumed that there may not be a September rate hike, so if anything, if there is a hike, there is more risk on the downside”. “The uncertainty in this regard is likely to keep the gold price in check in the run-up to the meeting”, Commerzbank said in a note.

Other precious metals were also under pressure on Thursday.

Shanghai gold premiums, over and above comparable London quotes, eased back on quieter volumes, but held near $3 per ounce after turning negative amid last week’s “Black Monday” equity turmoil for the first time since early July. Also weighing on gold was the absence of Chinese buyers with markets in the major gold consumer closed through Friday for public holidays.

Silver for immediate delivery added 0.1 percent to $14.7403 an ounce. The metal lost 0.6 percent on Wednesday, the first decrease in four days.