Investing.com -- Gold fell slightly on Tuesday, despite signs that a widespread global economic slowdown could resurface, as the dollar bounced off 15-month lows and a non-voting member of the Federal Reserve failed to rule out the possibility for as many as two interest rate hikes by the U.S. central bank before the end of the year.
On the Comex division of the New York Mercantile Exchange, gold for June delivery wavered between $1,284.00 and $1,303.85 an ounce, before settling at $1,288.90, down 6.90 or 0.53%. A session earlier, gold cleared the $1,300 level for the first time since last January, as soft U.S. manufacturing data pushed the dollar to its lowest levels since last summer. Over the first four months of the year, the previous metal has surged more than 21% and is on pace for one of its strongest first halves in more than a decade.
Gold likely gained support at $1,063.20, the low from January 4 and was met with resistance at $1,322.10, the high from August 8, 2014.
On Tuesday morning, Federal Reserve Bank of Atlanta president Dennis Lockhart told reporters at the 21st Annual Financial Markets Conference outside of Jacksonville, Florida, that although it is still possible for the Fed to raise short-term interest rates this year, further tightening "depends entirely on how the economy evolves." Last week, the Federal Open Market Committee (FOMC) held its benchmark Fed Funds Rate at its current targeted range between 0.25 and 0.50%, citing an uncertain economic and inflationary outlook. Lockhart is a non-voting of the FOMC during the current cycle.
Any rate hikes by the Fed this year are viewed as bearish for gold, which struggles to compete with high-yield bearing assets in rising rate environments.
When the Fed ended a six-year Quantitative Easing program in October, 2014, Core PCE inflation stood at 1.6%, slightly below its targeted 2% objective. When the U.S. Commerce Department released its Core PCE price index last week for April, the reading was virtually unchanged from its level 21 months earlier. At a separate panel during Tuesday's conference, Fed Cleveland president Loretta Mester, a voting member, emphasized that there's "convincing evidence," that Quantitative Easing is not infinite. Core PCE inflation, the Fed's preferred gauge of price stability, strips out volatile food and energy prices.
Currently, the European Central Bank and the Bank of Japan, two of the world's largest central banks, are operating large-scale asset purchasing programs in an effort to stave off deflation. While BOJ president Haruhiko Kuroda indicated that the BOJ could employ additional easing measures in March, the Japanese central bank surprised investors last week by leaving its benchmark interest rate unchanged. Also in March, the ECB increased the frequency and duration of its €1.5 trillion bond buying program, as inflation remains near historically-low levels.
The dollar received a boost on Tuesday after the Reserve Bank of Australia (RBA) lowered its benchmark interest rate by 25 basis points to a new record-low of 1.75%. As a result, the dollar surged versus a host of currency from commodity-dependent economies. AUD/USD fell more than 2.3% to an intraday-low of 0.7490, its lowest level in more than three weeks. USD/NZD lost more than 1.4% to an intra-session low of 0.6922, while USD/CAD gained more than 1.3% to a session-high of 1.2701.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained more than 0.25% to an intraday high of 92.92. The index, which is down more than 7% since early-December, is on pace to halt a six-day losing streak.
Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.
Silver for May delivery fell 0.236 or 1.34% to $17.420 an ounce.
Copper for May delivery lost 0.048 or 2.10% to 2.219 a pound.