Gold to Copper Succumb to Dollar as Fed Rate Concerns Mount

El-Erian: Federal Reserve Needs to Lead the Market
  • Fed’s Fischer says rate increase this year still a possibility
  • Even before his comments, odds of hike climbed above 50%

Gold and other metals fell and mining companies tumbled after a Federal Reserve official signaled an increase in U.S. interest rates is still possible this year.

The U.S. economy is already close to meeting the central bank’s goals and growth will pick up, Fed Vice Chairman Stanley Fischer said in a speech Sunday. Higher rates curb the appeal of precious metals, which don’t pay interest. The dollar headed for a second straight gain, making raw materials such as copper more expensive for holders of other currencies.

Precious metals have rallied this year as the Fed refrained from tightening monetary policy and other central banks embraced low or negative rates. Expectations of a rate increase have been growing, with odds of a move by December at 53 percent, up from 36 percent at the start of August. Fed chair Janet Yellen will speak at a gathering in Jackson Hole, Wyoming, on Friday.

“You’re seeing predicable movements in gold and silver and commodities across the board,” Tim Evans, the chief market strategist at Long Leaf Trading Group Inc. in Chicago, said in a telephone interview. “The market is preparing possibly for hawkish language from the summit, and if we get those hawkish statements that would be a negative event for metals, and metals are getting a little bit ahead of that today.”

Gold futures for December delivery slid 0.2 percent to settle at $1,343.40 an ounce at 1:39 p.m. on the Comex in New York, a third decline in four sessions. Silver futures for September delivery fell as much as 3.1 percent to a seven-week low.

In industrial metals, copper futures for December delivery fell 1.2 percent to $2.152 a pound on the Comex.

Copper, lead, nickel and zinc declined on the London Metal Exchange, while aluminum and tin were unchanged. An index of the six main metals traded in London has gained almost 9 percent this year, helped by low interest rates and signs that demand may exceed supplies in some markets.

  • Stockpiles of copper on the London Metal Exchange rose 8.9 percent to 229,375 metric tons, the biggest gain in more than six weeks.
  • A gauge of 14 gold producers tracked by Bloomberg Intelligence headed for the seventh decline in eight sessions, with Randgold Resources Ltd. among the biggest decliners.
  • A BI index of 18 base-metals miners slid 1.2 percent, with Anglo American Plc and Vedanta Resources Plc pacing losses.
  • Steelmakers also retreated, led by Brazil’s Companhia Siderurgica Nacional SA with a 6.4 percent slump.
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