Gold holds losses from biggest dip in 5 months after Fed rate hike

SINGAPORE: Gold steadied on Friday but largely kept losses made a day earlier when the metal suffered its biggest slide in five months after U.S. interest rates were raised for the first time in nearly a decade and the dollar surged.

In a much anticipated move, the Federal Reserve raised the range of its benchmark interest rate by a quarter of a percentage point on Wednesday, sending the dollar higher but hurting non-interest-paying gold.

Spot gold ticked up 0.5 percent to $1,056.25 an ounce by 0639 GMT, following a 2 percent slide in the previous session, its biggest one-day slide since July. The metal is down nearly 1.6 percent for the week in its worst performance in three weeks. “Continued strength in the dollar is weighing upon precious metals following the Fed’s rate announcement and we are likely to see recent low prints once again tested over the short term,” said MKS Group trader Sam Laughlin.

The dollar hit a two-week high on Thursday against a basket of major currencies, though it gave back some gains on Friday.

That sent gold to $1,047.25 in the previous session, close to a near-six-year low.

Gold has tumbled 11 percent this year, largely on uncertainty around the timing of the rate rise and on fears that higher rates would hit demand for the non-interest-paying metal.

Many are predicting further drops. Gold is likely to test the key $1,000 level soon, technical analysts said. Assets in SPDR Gold Trust, the world’s top gold-backed exchange-traded fund, fell 0.70 percent to 630.17 tonnes on Thursday, the lowest since September 2008.

Hedge funds’ net short positions in COMEX gold futures reached record levels this month.

“The larger trend in gold remains bearish and it is too early to call a bottom,” said ScotiaMocatta technical analysts.

Other precious metals were all struggling due to the robust dollar. Silver firmed up after an overnight slump of 3 percent, its biggest one day drop in nearly three months, while platinum steadied after posting its sharpest slide in a year.

Palladium fell for a second straight session on Friday, but was the best performer among the precious metals for the week with a gain of about 1.5 percent.

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