Investing.com - Gold futures sank to a one-month low in North American trade on Tuesday, extending overnight losses, as the dollar edged higher amid speculation the Federal Reserve will raise interest rates as early as next month.
Gold for June delivery on the Comex division of the New York Mercantile Exchange tumbled to a daily low of $1,235.80 a troy ounce, a level not seen since April 26. It last stood at $1,237.25 by 13:40GMT, or 9:40AM ET, down $14.25, or 1.14%.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, hit 95.56 in early trade, the most since March 29 and was last at 95.50, up 0.3%.
A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
A day earlier, gold dipped $1.40, or 0.11%, as markets continued to factor in the possibility of another interest rate hike by the Federal Reserve as early as June.
The latest signal came from Philadelphia Federal Reserve Bank President Patrick Harker who said Monday that two to three rate hikes are possible this year if the economy continues to grow as projected.
Gold futures are down more than 4% so far in May as recent comments from Fed officials as well as minutes of the Fed's April meeting have convinced many analysts and investors that a rate hike in June or July is a real possibility.
Odds of a Fed rate hike for June stood at nearly 35% Tuesday morning, up from just 4% a week earlier, according to futures markets. July odds were at about 60%.
Despite recent losses, prices of the yellow metal are still up nearly 17% so far this year amid indications the Fed will take a slow and cautious approach to raising interest rates this year.
A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.
Elsewhere on the Comex, silver futures for July delivery dropped 8.3 cents, or 0.51%, to trade at $16.34 a troy ounce during morning hours in New York, while copper futures inched up 1.6 cents, or 0.78%, to $2.071 a pound.