Gold Caps Biggest Loss in 11 Weeks on Revived Rate Concerns

  • Fed's Dudley say two interest rate hikes possible this year
  • Bill Gross says U.S. rate increase may come at June meeting

Gold lost the most in 11 weeks as the dollar gained on speculation that the Federal Reserve is still on track to boost U.S. interest rates this year.

While a report Friday showed weaker U.S. jobs figures, sending gold higher, Fed Bank of New York President William Dudley told the New York Times that it’s a “reasonable expectation” the central bank will raise rates twice in 2016. The dollar rose for a fifth straight session, curbing demand for gold as an alternative asset.

Bullion has benefited this year from expectations that slowing global economies will restrain the pace of U.S. rate increases. Lower borrowing costs boost gold’s appeal against interest-bearing assets such as bonds. Three of the world’s most influential bond investors warned against counting the Fed out even after Friday’s jobs report, helping damp gold’s rally.

“Gold is really getting whacked this morning,” Phil Streible, a senior market strategist at RJO Futures in Chicago, said in a telephone interview. “The Fed will raise rates eventually, and if we see stronger employment data next month, then maybe you’d see them raise rates in July.”

Gold futures for June delivery dropped 2.1 percent to settle at $1,266.60 an ounce at 1:37 p.m. on the Comex in New York, falling for a fourth time in five sessions. The decline was the biggest since Feb. 16.

Fed Outlook

Bill Gross, who runs the Janus Global Unconstrained Bond Fund, said policy makers may act at their next meeting in June. Mohamed El-Erian, the chief economic adviser at Allianz SE, said the Fed may move twice this year and Mark Kiesel, the chief investment officer for global credit at Pacific Investment Management Co., echoed the comments.

Traders put odds that the Fed will raise rates this year at less than 50 percent, down from more than 90 percent at the start of January.

In other metals news:

  • China’s gold reserves rose to 58.14 million ounces at the end of April from 57.79 million ounces a month earlier, according to the People’s Bank of China.
  • Gold holdings in exchange-traded products expanded 6.3 metric tons to 1,799.6 tons as of Friday, the highest since December 2013, data compiled by Bloomberg show.
  • Silver futures for July delivery fell 2.5 percent to $17.089 an ounce on the Comex.
  • On the New York Mercantile Exchange, platinum and palladium fell more than 3.5 percent.
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