Gold struggles near 2-week low on Fed rate hike expectations

Investing.com - Gold prices struggled near a two-week low struck in the previous session on Thursday, amid growing expectations that the Federal Reserve would raise interest rates after the summer.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery inched up $2.50, or 0.21%, to trade at $1,189.00 a troy ounce during European morning hours.

Futures were likely to find support at $1,181.00, the low from May 12, and resistance at $1,208.90, the high from May 26.

A day earlier, gold fell to $1,183.90, the lowest level since May 12, before ending at $1,186.50, down $1.30, or 0.11%, as the U.S. dollar rallied amid speculation the Fed was on track to raise interest rates in September.

Economic data released in the past week, including reports on inflation, new home sales, business investment and consumer confidence all indicated that the economy is gaining momentum after a slowdown in the first quarter, supporting the case for higher interest rates later this year.

Expectations of higher borrowing rates going forward is considered bearish for gold, as the precious metal struggles to compete with yield-bearing assets when rates are on the rise.

Also on the Comex, silver futures for July delivery tacked on 4.1 cents, or 0.25%, to trade at $16.68 a troy ounce. Silver hit $16.58 on Wednesday, a level not seen since May 13, before closing down 9.9 cents, or 0.59%, at $16.64.

Elsewhere in metals trading, copper for July delivery advanced 0.3 cents, or 0.11%, to trade at $2.772 a pound. On Wednesday, prices slumped to $2.758, the weakest level since April 28, before settling at $2.768, down 0.9 cents, or 0.34%.

In the currency market, the dollar rose to 124.30 against the yen, the most since June 2002, boosted by expectations that the economic recovery in the U.S. would accelerate the timeline for higher interest rates.

Meanwhile, the euro moved away from a one-month low against the greenback after the Greek government said it had started drafting an agreement with its international creditors, signaling progress in long-running negotiations to unlock more financial aid.

However, European officials played down suggestions of a deal, saying negotiators still had much work to do before reaching an agreement.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, slid 0.24% to 97.11 from Wednesday’s five week peaks of 97.88.

Later in the day, the U.S. was to release the weekly report on unemployment claims, as well as data on pending home sales for fresh indications on how the economy is performing.