Gold’s Back Out of Favor With Fed in Focus as Greek Deal Nears

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Gold futures fell for the third straight session, falling out of favor with investors as attention shifts away from Greece and back to the outlook for higher U.S. interest rates.

Federal Reserve Governor Jerome Powell suggested Tuesday that rates may rise as soon as September as the economy gains traction. Gold last week posted the biggest advance in a month after Fed officials indicated that monetary tightening will happen at a slow pace, while Greece faced an impasse with its creditors.

The metal’s rally is proving to be short lived. Mounting speculation that Greece will soon reach a deal to avoid default is cutting demand for haven assets. At the same time, signs of improving U.S. economic growth are reigniting concern that the Fed will raise rates soon, boosting the dollar. Higher rates curb gold’s allure because the commodity doesn’t pay interest or give returns like other assets such as bonds and equities.

“The U.S. recovery is far along in the cycle, and we’re on the verge for two interest-rate hikes by year-end,” Phil Streible, a senior market strategist at RJO Futures in Chicago, said in a telephone interview. “When you look at how far behind that cycle Europe is, it makes sense we see euro declines, dollar appreciation and gold weakness because of it.”

Gold futures for August delivery declined 0.6 percent to settle at $1,176.60 an ounce at 1:37 p.m. on the Comex in New York. The three-session slump was longest since June 5.

Rate Odds

The Fed’s Powell said the chances are about 50-50 that the economy will improve enough for tightening monetary policy in September. The central bank’s benchmark rate has been close to zero percent since 2008. The dollar headed for the biggest gain in two weeks against a basket of 10 currencies.

“People are rushing to the dollar and away from gold,” James Cordier, the founder of Optionsellers.com in Tampa, Florida, said in a telephone interview.

Silver futures for July delivery fell 2.5 percent to $15.737 an ounce on the Comex, the biggest drop since May 19.

Platinum futures for October delivery rose 0.6 percent to $1,068.40 an ounce on the New York Mercantile Exchange. On Monday, the metal touched $1,060.20, the lowest for a most-active contract since March 2009.

On Tuesday, the spot gold-platinum ratio reached the highest since Nov. 9, 2012, according to Bloomberg generic pricing.

Gold has settled at premium to platinum in every session since Jan. 15.

Palladium futures for September delivery climbed less than 0.1 percent to $695.75 an ounce on the Nymex, only the second gain this month. On Monday, the metal touched the lowest since September 2013.

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