Gold fell on Wednesday as the dollar gained after comments from US Federal Reserve officials raised expectations of an interest rate hike in March and overshadowed President Donald Trump’s first major policy speech to Congress.
New York Fed President William Dudley said the case for tightening monetary policy had become “a lot more compelling,” while San Francisco Fed President John Williams said he saw “no need to delay” raising rates.
Money market futures are now pricing in close to a 70 percent chance of a rise in official interest rates in March, compared with a little more than 30 percent on Tuesday.
“Rate rises are now priced in to futures but not in to gold, so the risk is to the downside (for gold),” said Mitsubishi analyst Jonathan Butler. Gold is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar in which it is priced.
Spot gold dropped 0.2 percent to $1,244.86 an ounce by 1104 GMT, heading for a third straight day of losses. The metal hit its highest since Nov. 11 at $1,263.80 on Feb. 27. US gold futures fell 0.6 percent to $1,246.40.
“Fed Chair Yellen will be giving a speech on Friday. If Yellen’s remarks also point to a rate hike in the near future, this will presumably cause the dollar to further appreciate and will weigh on the gold price,” Commerzbank said in a note.

Source: Arab News