Gold futures declined for the fifth time in six sessions as comments by a Federal Reserve official reignited concern that U.S. interest rates will climb this year.
Fed Vice Chairman Stanley Fischer said over the weekend there is “good reason” to believe inflation will accelerate, boosting speculation that the central bank won't delay its first rate increase since 2006. Stubbornly low inflation along with the prospect of tighter U.S. monetary policy has kept a lid on the metal, which doesn't pay interest or offer returns, unlike competing assets.
Fischer's comments were “a bit more hawkish than people anticipated,” Tai Wong, the director of commodity products trading at BMO Capital Markets in New York, said in a telephone interview. “If the Vice Chair is friendly towards a hike, there is a higher possibility we may see one sooner rather than later, and that may be part of the reaction we're seeing right now in gold.”
Gold is paring gains from earlier this month, when a slowdown in China and a global market rout raised speculation that the Fed would wait longer before raising rates. Rather than providing a refuge from the meltdown, bullion's volatility rose along with a measure of equity turbulence, diminishing its appeal as a haven.
In New York, gold futures for December delivery slid 0.5 percent to $ 1,128.30 an ounce at 9:47 a.m. on the Comex. Prices dropped 2.2 percent last week, the most in a month.
The probability that the Fed will increase rates before the end of 2015 rose to 60 percent on Monday, up from 48 percent a week earlier, futures trading showed. Gold is heading for a third straight annual decline as a resilient U.S. economy reduced some investors' faith in the metal as a store of value.
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