14 April 2015
Gold Holds Near $1,200, U.S. Rate Hike Outlook in Focus
(Reuters) - Gold steadied just above $1,200 an ounce on Tuesday after slipping nearly 1 percent in the previous session, with the possibility of a near-term hike in U.S. interest rates limiting any upside potential.
Recent comments from Federal Reserve officials suggest the U.S. central bank has not ruled out the chance of raising interest rates by June even as some analysts doubt that possibility amid signs of renewed economic weakness.
A U.S. rate increase, which would be the first in nearly a decade, dims the appeal of assets such as gold which does not pay interest.
Spot gold was up 0.3 percent at $1,201.30 an ounce at 0216 GMT. U.S. gold for June delivery gained 0.2 percent at $1,201.10 an ounce.
The strength in the U.S. dollar, which has basked in the growing likelihood that the Fed would raise rates this year, has been a key headwind for bullion.
"The cycle of the strong U.S. dollar has not ended. We are not very bullish about gold's price performance this year," said Jiang Shu, analyst at Industrial Bank in Shanghai.
Citigroup said it has cut its 2015 average gold price estimate to $1,190 from $1,220, citing "fundamental tightness being outweighed by continued U.S. dollar strength and macro investment headwinds".
Gold could fare well in the current quarter if the Fed does decide not to increase rates as early as June, but the metal is still at risk of turning lower when the U.S. central bank moves later in the year, said Jiang who sees gold moving near $1,100 towards end-2015.
Gold has not dropped too far off a seven-week top above $1,220 hit last week, indicating bulls were ready to push prices up if more signs emerge that a U.S. rate hike would be delayed.
Amid weaker gold prices, Canadian gold miners Alamos Gold Inc and AuRico Gold Inc unveiled a $1.5 billion merger plan on Monday, setting the stage for possible competing offers as miners scout for assets.