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Gold now vulnerable to move down to $1,900- analyst
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Markets see 59.3% chance of quarter point Fed hike in May
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Dollar 0.2% lower
(Adds details, updates prices)
By Seher Dareen
April 3 (Reuters) - Gold prices bounced back on Monday
as the dollar trimmed its initial gains that were driven by bets
that OPEC's surprise output cuts could jack up global energy
prices and force central banks to hike interest rates.
Spot gold rose 0.5% to $1,977.43 per ounce by 1206
GMT. U.S. gold futures gained 0.4% to $1,994.50.
Earlier in the session, gold touched a one-week low of
$1,949.54.
That seemed to be a "knee jerk reaction" to the dollar's
initial rise, also triggering some bargain hunting around the
$1960-$1965 levels, said StoneX analyst Rhona O'Connell.
"You'd have thought in the longer term, it might be
supportive because OPEC has introduced some uncertainties or
fresh uncertainties into the marketplace," she added.
The dollar trimmed its initial gains, making gold cheaper
for traders holding other currencies, as investors focus on
diverging central bank policy, with the impact of oil production
cuts complicating the inflation outlook. While gold is traditionally considered a hedge against
inflation, higher interest rates to rein in rising price
pressures dim appeal for the asset since it pays no interest.
CME's Fedwatch tool showed markets see a 59.3% chance of the
Federal Reserve hiking rates by a quarter point in May, while
markets see a 66% chance of a further 25 bp hike by the Bank of
England in May.
"Gold is now vulnerable to a move down to $1,900, given the
potential for a higher terminal Fed rate that markets are
currently pricing in," said Matt Simpson, senior market analyst
at City Index.
Bullion rose by nearly 8% last quarter after the global
banking turmoil drove bets that the Fed would slow its rate
hikes.
Silver fell 0.3% to $24.01 per ounce, platinum was also down 0.3% to $988.60 while palladium rose 0.7%
to $1,470.72.
(Reporting by Seher Dareen and Kavya Guduru in Bengaluru;
Editing by Kirsten Donovan and Sharon Singleton)
