LONDON: Gold prices fell on Tuesday as the dollar strengthened ahead of a meeting of the Federal Reserve at which the US central bank is expected to raise interest rates for the first time this year.

The looming Fed meeting has helped push gold down 4 per cent from a 1-1/2-year high in January.

Higher interest rates are negative for gold because they raise bond yields, reducing the appeal of non-yielding bullion, and tend to boost the dollar, making gold more expensive for users of other currencies.

Spot gold was down 0.5pc at $1,310.65 an ounce at 1324GMT, while the dollar strengthened against a basket of major currencies and US bond yields rose.

US gold futures for April delivery were 0.6pc lower at $1,310.60 an ounce. “The market has fully priced in a rate hike,” Saxo Bank analyst Ole Hansen said.

Investors were instead looking ahead to guidance on the pace of future rate increases, with the Fed likely to take a cautious approach that would help lift gold prices, he said.

As gold has fallen, funds have scaled back bets on higher prices, with the net long position in Comex gold falling to around 136,000 contracts from almost 210,000 in late January.

That gives investors more space to buy gold, which could help prices recover, MKS trader Sam Laughlin said.

Holdings of gold in exchange-traded funds (ETFs) tracked by Reuters have meanwhile jumped to the highest since November 2016.

Technical support for gold was at its 100-day moving average of $1,305 an ounce. In other precious metals, silver was down 0.5pc at $16.22 an ounce, echoing gold’s drop and is down more than 8pc from a 4-month high in January.

Platinum was down 0.6pc at $947.70 an ounce after touching its lowest since Jan 3 on Monday. Palladium was 0.4pc lower at $986.20 an ounce.

Published in Dawn, March 21st, 2018