Prices of gold and the corresponding SPDR Gold Trust (ETF) (NYSEARCA:GLD) were sliding Monday morning, starting in Asia and continuing in early trading in Europe and the US premarket. Pressure on gold prices may be linked to traders betting on the possibility of the Federal Reserve raising interest rates in September despite mixed economic data flowing out of the U.S.
Prices of gold futures for December delivery slid 0.18% to $1,332.05 a troy ounce in Asian hours and were trending down 0.20% in early trading in Europe after earlier touching a session low of $1,328.45.
Hawkish comments from Fed official
Expectations of a near-term rate hike were bolstered by a comment by Boston Fed President Eric Rosengren, who spoke on Friday in support of near-term rate increase. Rosengren said that reasonable grounds can be found to raise rates to avert what he termed as overheating of the economy.
The Fed last raised rates in December 2015, marking the first such move in nearly a decade. At the beginning of 2016, it appeared that the Fed could adjust rates up to four times this year, but those hopes have been faded amid mixed economic data.
It has recently appeared that the Fed can only afford to raise rates once this year and even that is in doubt given the recent disappointing U.S. employment report, a key indicator of economic health. The employment picture in the U.S. is still quite robust by historical standards nevertheless.
“The market has been so one sided this week in writing off any chance of a September move that any hint of hawkishness we get could catches people off guard […] Still, a September rate increase is very much a long shot at this point,” said Omer Esiner of Commonwealth Foreign Exchange.