Investing.com -- Gold futures fell sharply on Wednesday, tumbling to three-week lows, as a host of hawkish comments from Federal Reserve increased the possibility that the U.S. central bank could approve multiple interest rate hikes by the end of 2016, weighing on the precious metal.
On the Comex division of the New York Mercantile Exchange, gold for April delivery traded in a broad range between $1,215.50 and $1,249.80 an ounce before settling at $1,223.90, down 24.80 or 1.99% on the day. Gold suffered its worst one-day decline on the year, posting only its second daily loss of at least 2% over the last 10 weeks. Gold futures have closed lower in three of the last four sessions and seven of the last 10 trading days. In spite of the recent sell-off, gold has still gained more than 14% in value since the start of the new year and is on pace for one of its best opening quarters in 30 years.
Gold likely gained support at $1,141.00, the low from Feb. 4 and was met with resistance at $1,280.70, the high from March 11.
While delivering a speech to bond traders on Tuesday night at the Money Marketeers of New York University's conference on Growth and the Role of Economic Policies, Federal Reserve Bank of Philadelphia president Patrick Harker squarely aligned himself with his hawkish colleagues on the Federal Open Market Committee (FOMC). Citing continued improvement in the economy, Harker said the Fed should consider raising interest rates as early as its next meeting on April 28-29 and that he prefers at least three rate hikes before year's end. Harker, who became president of the Philadelphia Fed in mid-2015, is a non-voting member of the FOMC until the start of next year.
"I think we need to get on with it," Harker said. "I am not a two (rate) rise person. This economy is really quite resilient to a lot of the headwinds so if that continues I would be supportive of another 25 basis point rise."
Separately, Chicago Fed president Charles Evans said Tuesday that he expects two more rate hikes from the Fed this year. The FOMC's benchmark Federal Funds Rate continues to hover around 0.37%, after the U.S. central bank opted to leave its target range unchanged last week between 0.25 and 0.50%. The Fed has held short-term interest rates steady at each of its last two meetings since it ended a seven-year zero interest rate policy (ZIRP) in December. Even with three rate hikes over the next nine months, Harker still believes monetary policy would be "incredibly accommodative" around 1%.
Harker's statements followed comparable hawkish comments from San Francisco Fed president John Williams and Atlanta Fed president Dennis Lockhart earlier this week. In recent months, dovish members of the Fed have argued that rates should continue to remain relatively low, as slowing economic conditions in China spill over into the global economy.
Gold, which is not attached to interest rates or dividends, struggles to compete with high-yield bearing assets in periods of rising rates.
Gold also retreated on Wednesday, one day after police arrested two suspects in the twin terror attacks in Belgium which killed 31 people and wounded approximately 270 others. Gold inched up following Tuesday's bombing, as investors sought shelter in the safe-haven asset.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, surged more than 0.55% to an intraday high of 96.24 in U.S. afternoon trading. While the index rose to near one-week highs, it is still down by more than 1% over the last month.
Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.
Silver for May delivery plummeted 0.600 or 3.78% to 15.285 an ounce.
Copper for May delivery lost 0.500 or 2.21% to 2.24 a pound.