WASHINGTON (dpa-AFX) - Increasing expectations about rate hikes by the Federal Reserve boosted the U.S. dollar and dampened the yellow metal in trading trends early on Tuesday.
The rise in interest rate expectations comes amidst an uptick in crude oil prices. Brent crude futures for September settlement are currently trading at $77.54, having edged up 0.03 percent from the previous day's close. WTI crude futures for August settlement have also gained 0.08 percent in the day's trading and is currently hovering near $73.92.
The CME FedWatch tool that tracks the expectations of interest rate traders shows the likelihood of interest rates rising above the current level of 3.5-3.75 percent at 36 percent in the FOMC in July. The probability rises to 69 percent in September and 78 percent in October.
With renewed Fed hike bets boosting the U.S. dollar, the Dollar Index has surged ahead. The Dollar Index which measures the strength of the dollar against a basket of six currencies has rallied 0.24 percent overnight and is trading around the 52-week high of 101.26.
The slump in gold prices, driven by expectations of an increase in interest rates is attributed to the opportunity loss of holding the yellow metal which is typically non-interest bearing in nature.
Gold Futures for August settlement is currently trading at $4,138.67, shedding 1.5 percent from the previous close of $4,202.70. While the day's trading ranged between $4,108.40 and $4,215.22, the 52-week trading ranged between $3,250.50 and $5,626.80. Gold Futures had touched an all-time high of $5,626.80 on January 29.
The day's price movements have resulted in a weekly loss of 4.9 percent and a monthly loss of 9.1 percent for the yellow metal. Year-to-date losses are at 5.6 percent. The yellow metal's price gain over the 3-year horizon however stands at more than 115 percent.
Spot Gold is currently trading 1.7 percent lower on an overnight basis at $4,119.16 per troy ounce. While the day's trading ranged between $4,090.99 and $4,198.26, the 52-week trading ranged between $3,247.86 and $5,595.46. Spot Gold had touched an all-time high of $5,595.46 on January 29.
At current prices, Gold Futures and Spot Gold have both gained more than 22 percent over the past year.
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