(Kitco News) - Expectations of an aggressive Federal Reserve are dragging gold prices down, with rising geopolitical tensions or even falling stocks unable to help, according to one precious metals analyst.

“The rate hike is now looming and people are suddenly realizing that gold may not be the most attractive long position at the moment,” David Govett, head of precious metals trading at Marex Spectron in London, told Bloomberg on Thursday. “People’s memories are short and their pockets not so deep.”

The December rate hike by the Fed has been priced into the markets for a while now, with CME 30-day Fed Fund futures currently showing an almost 100% chance of a rate hike. For the year to come, markets are only pricing in a 50% chance of two rate hikes by November 2018.

Capital Economics has a more aggressive outlook, projecting that the Fed will raise rates at least four times in 2018. But, it believes the scaling back of the quantitative easing (QE) will still feel gradual and modest.

“Unwinding QE and returning central bank balance sheets to their previous size is not an urgent priority, and is likely to be gradual and partial. It is also likely to be clearly communicated in an effort to avoid shocks to the bond market. In any case, the fact that QE reversal is likely to be more gradual than QE itself suggests that it may have only a very modest impact on the bond markets,” Capital Economics said in a report released on Thursday.

Gold prices tumbled to a more than four-month low on Thursday, with February Comex gold last seen trading at $1,249.60, down 0.28% on the day. Meanwhile, spot gold on Kitco.com was last at $1247.10, down 0.02% on the day.

“Scant risk aversion in the marketplace recently has emboldened the sellers,” said Jim Wyckoff, senior technical analyst at Kitco News. “A rebound in the U.S. dollar index this week is also working against the precious metals market bulls.”

By Anna Golubova

For Kitco News

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