Gold Declines as Scrutiny Over Rate Outlook Drives Volatility

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Gold futures fell for the third time in four days as traders pored over U.S. economic data to gauge the outlook for when the Federal Reserve will raise interest rates.

With each report on U.S. growth sending prices in a different direction, the metal’s 30-day historical volatility is near the highest in more than a month. Gold advanced early on Thursday after government data showed housing starts rose less than forecast in March, boosting demand for a haven. About 90 minutes later, a Federal Reserve report showed improving conditions in the Philadelphia region and futures fell.

Traders are parsing the data for clues on whether the economy is clipping along fast enough to warrant a gain for interest rates. Higher rates diminish the allure of the metal, which generally only gives returns through price gains, spurring investors to favor assets with better yield prospects such as equities and bonds. Faster expansion also helps to strengthen the dollar, cutting demand for gold as an alternative.

“Gold is data dependent and trading on the opposite side of the dollar, and we’re probably going to do this for the months to come,” James Cordier, the founder of Optionsellers.com in Tampa, Florida, said in a telephone interview. “We’re trying to handicap interest rates in the U.S.”

Gold futures for June delivery slid 0.3 percent to settle at $1,198 an ounce at 1:47 p.m. on the Comex in New York. The metal climbed 0.7 percent on Wednesday after a report that showed U.S. manufacturing is sputtering.

Prices have rebounded almost 5 percent from this year’s low in mid-March as Fed policy makers trimmed their expectations for how fast interest rates will rise. Economic woes in Europe and increased global stimulus have also brought investors back to the metal after two straight annual losses.

‘Greek Drama’

Talks on resolving Greece’s financial crisis must “intensify” if euro-area finance ministers are to be able to assess the country’s reform commitments when they meet next week, the European Commission said Thursday.

“The gold market is tired of the never-ending Greek drama, but I think it’s like a dad with several young children: you tune out the madness, but still have to pay attention that one isn’t going out to play in traffic,” Tai Wong, the director of commodity products trading at BMO Capital Markets Corp. in New York, said in an e-mail.

Silver futures for May delivery added less than 0.1 percent to $16.284 an ounce on the Comex.

Platinum futures for July delivery climbed 0.2 percent to $1,159.20 an ounce at the New York Mercantile Exchange, gaining for the second day, the longest streak since April 1. Palladium futures for June delivery climbed 1.6 percent to $779.75 an ounce.

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