Investing.com - Gold prices slumped to a one-week low in European trade on Tuesday, amid growing expectations of a U.S. interest rate hike by the end of this year.
Gold for December delivery on the Comex division of the New York Mercantile Exchange fell to a session low of $1,336.70 a troy ounce, the weakest since July 29. It was last at $1,337.15 by 06:59GMT, or 2:59AM ET, down $4.15, or 0.31%.
A day earlier, gold shed $3.10, or 0.23%, after the latest U.S. employment report bolstered expectations of faster economic growth and revived speculation that the Federal Reserve will raise interest rates this year.
Fed funds futures prices showed traders now see a 44% of a U.S. rate hike by December, according to CME Group's (NASDAQ:CME) Fed Watch tool. That compares with around 30% as recently as last week. September odds were at around 21%, compared to less than 10% late last week.
Gold is sensitive to moves in U.S. rates. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 96.44 early Tuesday, recovering from levels below 95.00 just a week ago, amid resurgent expectations of a U.S. interest rate hike by the end of this year.
A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
The yellow metal flirted with a more than two-year high above the $1,370-level less than a week ago as a string of disappointing U.S. economic data prompted market players to push back expectations for the next U.S. rate hike.
For the year, the precious metal is up nearly 26%, boosted by concerns over global growth and expectations of monetary stimulus.
Also on the Comex, silver futures for September delivery shed 13.3 cents, or 0.67%, to trade at $19.67 a troy ounce during morning hours in London, while copper futures lost 1.9 cents, or 0.88%, to $2.146 a pound.
Investors digested another round of Chinese economic data. The National Bureau of Statistics reported earlier that China’s consumer price index rose 1.8% in July from a year earlier, in line with forecasts and slowing from 1.9% in the preceding month.
The producer price index fell 1.7% on a year-over-year basis, compared to a decline of 2.6% in June, the agency said.
The Asian nation is the world’s largest copper consumer, accounting for nearly 45% of world consumption.