Gold bounces back after dipping below $1,200

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Gold futures limited overnight losses on Monday, after plunging below the $1,200-level for the first time since February this year as investors realigned their priorities on the possibility of a near-term U.S. interest rate hike.

Trading volumes, however, are expected to remain thin as markets in London and New York are closed due to public holidays.

Gold for June delivery in New York fell to a session low of $1,199.00 a troy ounce, a level last seen February 17, before bouncing back to $1,212.40 by or 7:29AM ET, down 0.35%, or $4.30.

Expectations for an near-term interest rate increase mounted after Fed Chair Janet Yellen said late Friday that an increase would be appropriate if the economy continues to improve as expected.

The dollar soared to its highest level in two months against rival major currencies following hints from Fed officials about a potential rate hike.

A stronger U.S. dollar is bad news for holders of gold, as it makes the metal less attractive as an alternative asset because it makes dollar-priced commodities more costly for investors who trade in other currencies.

Gold futures have fallen nearly 7% so far in May as a rate hike in June or July is becoming a real possibility.

Elsewhere in metals trading, silver futures for July delivery gave up 21.9 cents, or 1.35%, to trade lower at $16.05 a troy ounce during morning hours in New York, while copper futures shed 1.5 cents, or 0.71%, to trade lower $2.099 a pound.

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