Gold futures traded lower on Wednesday, poised for their worst settlement since mid-February as some upbeat U.S. economic data further fueled expectations that the U.S. Federal Reserve will decide to raise interest rates at its meeting later this month.
June gold GCM6, -0.50% lost $6, or 0.5%, to $1,208.80 an ounce on Comex. Prices haven’t settled at a level this low since Feb. 16, according to FactSet. They posted a loss of 5.9% for the month of May.
Gold traders have been waiting for “more valuable information regarding the direction of the Fed and a potential rate hike this month,” said Adam Koos, president of Libertas Wealth Management Group.
“The U.S. dollar DXY, -0.26% has had a great run recently, which has put some short-term, inverse pressure on gold,” he said. But the greenback is “now running into a ceiling of resistance that goes back to March and could start to see some downside pressure as more economic news unravels in the coming weeks.”
U.S. data released Wednesday mixed. The Institute for Supply Management said itsmanufacturing index rose to 51.3% last month from 50.8% in April. The improvement may raise the likelihood that the Fed will lift rates when it concludes a two-day meeting on June 15. Construction spending in April, however, dropped by 1.8%.
Higher interest rates tend to lift demand for the dollar, dampening buyer interest in dollar-priced precious metals. Rate increases can also put pressure on gold as commodities don’t pay interest, sending investors in search of higher yields in a rising-rate climate.
The dollar traded lower Wednesday, after a potentially far-reaching U.K. “Brexit” found some traction in two polls, but that failed to provide much support for gold.
As a gold investor, “one of the hardest things to do is to be patient,” said Koos. “For now, if you’re not in the trade, I’d be looking to get in at these prices. The market is telling me that gold broke it’s long-term downtrend a few months ago and what we’re seeing today is simply a short-term pullback in an overall long-term positive trend.”
As for other metals Wednesday, July silver SIN6, 0.04% rose 2.6 cents, or 0.2%, to $16.02 an ounce, after a May loss of 10.2%.
July copper HGN6, -0.93% traded at $2.074 a pound, down 2.2 cents, or 1%. July platinum PLN6, -0.75% fell $8.10, or 0.8%, to $972.30 an ounce, while Sept. palladium PAU6, 0.34% tacked on $1.25, or 0.2%, to $548.10 an ounce.
The SPDR Gold Trust GLD, -0.56% traded 0.4% lower, while iShares Silver TrustSLV, -0.03% added 0.2%.