Gold futures hover around three-week low as Federal Reserve signals rates rise in 2015

Gold futures traded close to three-week low as Federal Reserve officials signaled a rise in interest rates by 2015, while further trimming monetary stimulus, boosting the US dollar and curtailing demand for the precious metal. Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, were unchanged yesterday, after retreating from three-month high on March 17.

On the Comex division of the New York Mercantile Exchange, gold futures for settlement in April traded at $1 333.20 per troy ounce at 07:48 GMT, down 0.6% on the day. Prices shifted in a tight daily range between $1 335.00 an ounce and $1 328.00 an ounce, close to yesterdays three week low.

Prices have retreated from a six-month high of $1 392.60 an ounce on March 17 as the US dollar index, which measures the performance of the greenback against a basket of six major peers, advanced to a two-week high yesterday. Gold is down 3.8 percent this week, and was poised to snap six straight weeks of advances, the longest winning run since August 2011.

Gold futures are up 10% this year amid concern the economic growth of the largest bullion consumer, China, may slow, while unrest in Ukraine hurt emerging market assets already weakened by reductions in Fed stimulus, boosting demand for the precious metal as a store of value.

Fed stimulus outlook

The Federal Reserve revised its forecasts, showing more policy makers predicted the main interest rate, now close to zero, would increase at least to 1% by the end of next year and 2.25% by the end of 2016, higher than previously forecast. The Fed also reduced monthly asset purchases by $10 billion to $55 billion and reiterated it will cut purchases “in further measured steps” at next meetings.

The tone of the central bank “was interpreted as being slightly more hawkish than expected, contributing to a sharp rise in the dollar and pressuring gold in the process,” Edward Meir, an analyst at INTL FCStone Inc. in New York, wrote in a report, cited by Bloomberg. “With the Ukrainian situation now in an uneasy limbo, the upside momentum seems to have stalled.”

Assets in the SPDR Gold Trust, the biggest bullion-backed ETP, were unchanged at 812.78 tons on Tuesday, after retreating from the highest level since December 20th. Holdings in the fund are up 0.9% this year after it lost 41% of its assets in 2013 that wiped almost $42 billion in value. A total of 553 tons has been withdrawn last year.