Gold falls late, reverses gain after Fed rate move

By Alonso Soto

NEW YORK (BestGrowthStock) – Gold fell sharply late on Thursday, erasing gains as investors cashed in bullion for U.S. dollars after the Federal Reserve raised a key interest rate.

In after-hours trading, U.S. gold futures for April delivery shed $10.20 to bid at $1,110.50 an ounce at 5:07 p.m. EST (2207 GMT). Just before the announcement it was trading positive after settling lower.

Spot gold was bid at $1,108.05 an ounce at 5:01 p.m. EST (2201 GMT) after staying above $1,120.00 in New York afternoon trading. Earlier gold rose to a session high of $1,123.30 an ounce.

Late in the afternoon, the Federal Reserve said it was raising its discount rate — the rate it charges banks for emergency loans, citing improvement in financial market conditions.

After the announcement, gold slid as The dollar quickly jumped to its highest level against the euro since May.

“The fact that the euro has fallen to a new low so soon after the news puts a lot of pressure on gold overall,” said Frank McGhee, head of precious metals trading at Integrated Brokerage Services LLC in Chicago. “I think if we limit losses to another $10 or $15, we might hold in this particular area. Otherwise we are going to run back down to” three-month lows.

April gold fell below $1,045 an ounce on February 5, its lowest levels since early November.

Before the Fed announcement, gold rose as investors bought bullion despite a firmer dollar and news of upcoming gold sales by the International Monetary Fund.

Debt default worries in Europe had pushed investors toward gold. The price of gold in euro terms hit a record high of 824.27 euros an ounce.

Investors use gold as a hedge against financial turbulence and inflation. Gold generally has in inverse relationship with the dollar, which rallied against the euro in a volatile session. Mixed data fed doubts about the U.S. economy but failed to offset concern about the euro zone.

WON’T DUMP IT

The IMF said it would sell 191.3 tons of gold to the open market under a program approved last year to boost resources for lending. The move has called into question demand for bullion from official sector buyers.

The fund said the sales, part of a program launched last year, will be phased over time to avoid market disruptions.

It left the door open for central banks to keep buying gold directly, nearly four months after India’s purchase of 200 tons boosted the country’s gold holdings to the 10th largest among central banks.

Analysts see little interest among central banks to buy more gold.

Sri Lanka’s central bank governor said his bank was unlikely to buy more gold from the IMF right now as the island nation has already reached its required reserve level.

Among other precious metals, silver erased gains to bid at $15.84 an ounce, platinum was bid at $1,513.00 an ounce against $1,524.50 and palladium at $428.00 from $433.50.

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(Reporting by Alonso Soto; Editing by David Gregorio)

Gold falls late, reverses gain after Fed rate move