Gold retreated from the highest in almost seven weeks as the dollar strengthened, reducing demand for the metal as an alternative investment.
The greenback headed for the biggest gain since mid-March against a basket of six currencies, a day after a private report showing expansion in U.S. service industries eased concerns on the economy. Holdings in exchange-traded products backed by gold fell 1.8 metric tons on Monday to 1,618.7 tons, the lowest since Jan. 15, according to data compiled by Bloomberg.
Gold dropped for three straight quarters amid speculation that an improving U.S. economy is pushing the Federal Reserve closer to raising interest rates for the first time since 2006. Richmond Fed President Jeffrey Lacker, who suggested on March 31 that the case for boosting rates will remain “strong” at the June meeting, said Friday that a report showing slower U.S. hiring didn’t alter his view on policy.
“The dollar is ripping right back on up,” Phil Streible, the senior market strategist at RJO Futures in Chicago, said in a telephone interview. “Gold is down as a result. There’s still talk that the U.S. economy is most likely going continue to gain more momentum on the recovery.”
Gold futures for June delivery fell 0.7 percent to settle at $1,210.60 an ounce at 1:44 p.m. on the Comex in New York. The price reached $1,224.50 on Monday, the highest since Feb. 17, after U.S. payrolls data fell short of economists’ projections in an April 3 report.
Fed Bank of New York President William C. Dudley said on Monday that the pace of rate increases may be “shallow” once tightening begins, and that recent economic weakness was probably temporary. Higher interest rates cut bullion’s allure because the metal generally offers returns only through price gains.
Silver futures for May delivery slid 1.6 percent to $16.84 an ounce on the Comex, the second loss in three sessions.
Platinum futures for July delivery fell 0.6 percent to $1,173.90 an ounce on the New York Mercantile Exchange. Palladium futures for June delivery rose less than 0.1 percent to $769 an ounce.