Investing.com - Gold futures pared gains Tuesday amid growing expectations that the Federal Reserve would increase its benchmark rate in June, which pushed the dollar off the lows, denting demand for the precious metal.
Gold for June delivery on the Comex division of the New York Mercantile Exchange lost $5.03 or 0.40%, to $1,256.37 a troy ounce by 13:46 EDT.
According to investing.com’s Fed rate monitor tool, nearly 80% of traders expect the Fed to hike interest rates in June, compared to only 67% of traders in the previous week.
The jump in June rate hike expectations came against the backdrop of weaker than expected economic data, which failed to offset June rate hike expectations, as treasury yields and the dollar rose to session highs, reducing investor sentiment to hold bullion.
IHS Markit flash U.S. manufacturing purchasing managers index (PMI) fell to its lowest level in eight months with a reading of 52.5, while its services (PMI) soared to a four-month high with a reading of 54, which was above economists’ forecasts.
A reading above 50 indicates expansion in the sector; below 50 indicates contraction.
In a separate report on Tuesday, the Commerce Depart said sales of newly constructed homes fell in April to a seasonally adjusted annual rate of 569,000. That was below analysts’ estimates of a drop to 610,000.
The U.S. 10-Year rose to a session high of 2.278 while the US Dollar Index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, leaped to 97.11, up 0.23%.
Gold is sensitive to moves higher in both bond yields and the U.S. dollar – A stronger dollar makes gold more expensive for holders of foreign currency while a rise in U.S. rates, lift the opportunity cost of holding non-yielding assets such as bullion.
Investors look ahead to the release of the Federal Reserve’s minutes for its May meeting on Wednesday, to gauge whether the Fed’s outlook concerning monetary policy has been impacted by recent economic data and geopolitical developments.
Silver futures fell 0.19% to $17.160 a troy ounce while platinum traded flat at $950.75.
Copper added 0.10% to $2.598, while natural gas dropped by 2.69% to $3.332.