By A. Ananthalakshmi
SINGAPORE (Reuters) – Gold steadied after two days of losses on Wednesday but held below $1,300 an ounce, near a four-week low, on a stronger dollar and fears that the Federal Reserve could hike U.S. interest rates sooner than expected.
Fed ChairĀ Janet YellenĀ said on TuesdayĀ the U.S. central bankĀ could raise rates earlier or faster if hiring and wages take off in an unexpected way, though she signalled that the Fed will keep monetary policy loose until jobs data shows the effects of the financial crisis are “completely gone”.
Spot gold had gained 0.3 percent to $1,297.94 an ounce by 0629 GMT, after losing 3.3 percent in the last two sessions – the metal’s biggest two-day loss since October.
Traders said gold could have further to fall, especially as this week’s $40 drop has failed to generate a robust pick-up in physical demand inĀ Asia.
“I don’t see any new positions created at this level or any fresh buying in the physical markets,” saidĀ Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.
“Prices will see some range-trading now and could consolidate at $1,280-90.”
Fung said prices in Hong Kong were either on par with the global benchmark, or slightly lower, due to weak demand.
InĀ China, the top consumer of gold, local premiums edged up to $1 an ounce on theĀ ShanghaiĀ Gold Exchange from a small discount in the previous session.
The bigger concern in the market is still about U.S. interest rates, with a hike likely to encourage investors to withdraw money from non-interest-bearing assets such as gold.
Recent economic data from theĀ United States, including that on jobs, has indicated that the economy is on a strong footing.
A strengthening U.S. economy and job market means the Fed should begin raising interest rates “relatively soon,”Ā Kansas City Federal Reserve BankĀ PresidentĀ Esther GeorgeĀ said on Tuesday.
George said by many measures, including a recent rise in rent and food prices, and strong hiring reports, the Fed should have already lifted interest rates from the zero level.
“Despite Yellen defending the Fed’s stance to maintain loose monetary policies, the bullion markets seemed to interpret her comments for the possibility of an earlier than an anticipated rate hike as gold-bearish,” HSBC analysts said in a note.
“With the break below $1,300/oz and technical weakness, further losses for gold are likely.”
