Gold drops as bets increase for Federal Reserve to raise rates

SINGAPORE (May 18): Gold snapped three days of gains as bets on the Federal Reserve lifting rates this year gained after stronger-than-expected US data and comments from two policy makers that pointed toward increases.

Bullion for immediate delivery lost as much as 0.4% to US$1,274.19 ($1,750.45) an ounce and traded at US$1,275.50 at 11.46am in Singapore, according to Bloomberg generic pricing. Traders are putting odds of a hike next month at 12%, up from 4% Monday, according to Fed funds futures.

The metal has rallied 20% this year as slowing global growth helped to quell chances of tighter US policy and central bankers in Europe and Japan embraced negative rates. On Tuesday, Atlanta Fed President Dennis Lockhart and San Francisco’s John Williams said at least two increases may be warranted this year because the economy continues to expand. Reports showed US consumer prices climbed by the most in three years while new-home construction rose, and the rate-setting Federal Open Market Committee will on Wednesday release minutes of its April policy meeting.

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