Investing.com - Gold futures struggled near four-week lows in European trade on Tuesday, adding to overnight losses, as comments from Federal Reserve officials added to expectations that a rate hike could come as soon 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.
His comments came after San Francisco Fed president John Williams said in an appearance in New York that he thinks it could be appropriate to raise interest rates two to three times this year, followed by another three to four times in 2017.
Also Monday, St. Louis Federal Reserve President James Bullard said that a relatively tight labor market in the U.S. may put upward pressure on inflation, raising the case for higher interest rates.
Gold for June delivery on the Comex division of the New York Mercantile Exchange shed $6.75, or 0.54%, to trade at $1,244.75 a troy ounce by 06:42GMT, or 02:42AM ET.
A day earlier, prices fell to $1,243.50, a level not seen since April 28, as markets continued to factor in the possibility of another interest rate hike by the Federal Reserve as early as June.
Gold futures are down almost 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 30%, up from just 4% a week earlier, according to futures markets. July odds were at about 58%.
The U.S. dollar held at its highest level in nearly two months against a basket of major currencies early Tuesday on hints the Fed is getting closer to raising interest rates.
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.
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.
In the week ahead, investors will continue to focus on U.S. economic reports to gauge if the world's largest economy is strong enough to withstand further rate hikes in 2016, with Friday’s revised first quarter growth data in the spotlight.
In addition, Fed Chair Janet Yellen speaks on Friday, as traders search for more clues on the timing of the next U.S. rate hike.
Elsewhere on the Comex, silver futures for July delivery dropped 12.3 cents, or 0.75%, to trade at $16.30 a troy ounce during morning hours in London, while copper futures inched up 0.5 cents, or 0.24%, to $2.060 a pound.