Gold Falls a Third Day as Market Awaits U.S. Fed's Policy Views

  • BOJ keeps negative rates after ECB's unprecedented stimulus
  • Gold ETF holdings fall from highest level since July 2014

Gold futures had the biggest three-day loss since early November as the dollar climbed and traders increased bets that the Federal Reserve will tighten U.S. monetary policy this year.

The Bloomberg Dollar Spot Index gained for a second day, reducing the appeal of commodities including gold that are priced in the U.S. currency. Traders are betting there’s a 52 percent chance that U.S. policy makers will raise interest rates by June, up from 6 percent a month ago, according to Fed-fund futures.

Greater stability in financial markets after monetary intervention by central banks could ease the Fed’s path to raising rates, hurting gold prices because the metal doesn’t pay interest. While the Bank of Japan refrained from bolstering monetary stimulus at its meeting Tuesday after a surprise move to adopt negative rates in January, it reiterated it could loosen policy if needed. The European Central Bank last week announced unprecedented easing.

“It looks like we’re due for a sell-off,” Michael Smith, the president of T&K Futures & Options in Port St. Lucie, Florida, said in a telephone interview. “The market is starting to think that maybe the Fed can raise rates again, without harming the economy. That is another factor pressuring gold to the downside.”

Gold futures for April delivery fell 1.1 percent to settle at $1,231 an ounce at 1:48 p.m. on the Comex in New York, taking losses in the past three sessions to 3.3 percent, the biggest such decline for a most-active contract since Nov. 2.

Holdings in exchange-traded funds backed by gold fell after reaching the highest since July 2014. Assets dropped 5.3 metric tons to 1,733 tons on Monday, according to data compiled by Bloomberg.

In other metals:

  • Silver futures declined on the Comex, while platinum and palladium slid on the New York Mercantile Exchange.
  • A gauge of 14 senior gold miners tracked by Bloomberg Intelligence was little changed, after falling as much as 2.5 percent.
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