Interest Rate Expectations Pressure Gold Below $1,200 In Holiday Trading – by Neils Christensen (Kitco News – May 30, 2016)

(Kitco News) – According to some analysts, gold prices remain on the defensive Monday, in thin holiday activity, as traders continue to price in a rate hike from the Federal Reserve some time during the summer.

Both U.S. and British markets are closed for holidays Monday and thin volume helped push gold future below the key psychological support level at $1,200 an ounce in electronic markets. Overnight gold prices hit a session low of $1,199 an ounce. Although prices have managed to push off those lows, they are still under pressure, last trading at $1,207.70 an ounce, down 0.50% on the day.

Alex Thorndike, senior precious metals dealer at MKS, said that traders are still digesting Fed Chair Janet Yellen’s comments Friday. At an event at Harvard University, she said she was optimistic that the U.S. economy will continue to expand and added that it could be appropriate to raise interest rates in a few months.

Despite growing interest rates pressures, he said he will be watching to see if gold can hold key support levels. “Gold has had a significant decline throughout May (-7.7%) and one would think we would be approaching an interim bottom in the near future. Next important supports include the 38.2% retracement of the Dec-May rally ($1205.50), the psychological $1200 level and then $1191,” he said in a report Monday.

Colin Cieszynski, senior market analyst at CMC Markets, said that momentum indicators for gold continue to point to lower prices. He said he is currently watching support at $1,193.

Analysts at Commerzbank said in a note Monday that the investor sentiment is similar to November where markets were preparing for a December rate hike. They noted that gold fell about $150, hitting its multi-year low at $1,050. They added that since its peak at $1,300 at the start of the month, gold has lost about $100.

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