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Gold Hits 7-Week Low as Investors Sell Holdings

May 25, 2016 at 18:55 by Andrew Moran

Gold prices fell for the sixth consecutive trading session on Wednesday. With growing expectations of an interest rate hike by the Federal Reserve next month, more investors sold their holdings of the yellow metal.

Gold futures reached a seven-week low by slipping $10.96, or 0.9%, to $1,218.70 per troy ounce at 13:23 GMT on the New York Mercantile Exchange. Spot gold also tumbled $5.29, or 0.43%, to $1,223.61. Gold has experienced a decline for 12 of the last 18 trading sessions.

Silver prices climbed $0.06, or 0.38%, to $16.30 an ounce. Copper prices inched $0.03 higher to $2.10 a pound.

Year-to-date, gold prices are still up 15%. Due to sluggish global economic growth and financial market volatility, investors have been seeking a safe-haven to protect their wealth. However, with the US central bank on the brink of raising interest rates again, the demand for gold is starting to wane.

Since the minutes from the April 26–27 Federal Open Market Committee (FOMC) meeting were released on May 18, gold prices have dropped close to 5%. Gold is sensitive to raising interest rates because the opportunity cost of owning the dollar-priced yellow metal, which does not produce any yield, is higher.

Philadelphia Fed President Patrick Harker confirmed on Wednesday that a June rate hike will happen, unless US economic data weakens.

“If the data comes in and it is not consistent with my view of the strength in the economy, then I would pause. But otherwise I think a June rate increase is appropriate,” Harker said in a statement to the media. “But again, it does depend on what that data looks like.”

Polls peg the likelihood of a rate hike during next month’s FOMC meeting at 30%. That number jumps to 60% for July’s policy meeting. Fed officials have confirmed that the normalization of interest rates is gradually coming.

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