Gold Futures Settle Lower As Dollar Rises On Rate Hike Hopes

Gold futures settled lower on Tuesday as the dollar climbed to a fresh two-year high and bond yields surged amid rising expectations the Fed would announce a series of steep rate hikes this year.

The dollar climbed with traders reacting to St. Louis Federal Reserve Bank President James Bullard’s comments that more aggressive policy tightening is needed to combat inflation.

The dollar index, which rose to 101.02 pared some gains subsequently and was at 100.91, up 0.12% from the previous close.

Gold futures for June ended lower by $27.40 or about 1.4% at $1,959.00 an ounce.

Silver futures for May ended down $0.759 at $25.391 an ounce, while Copper futures for May settled at $4.7180 per pound, down $0.0840 from the previous close.

The central bank is prepared to get to neutral expeditiously, Bullard said on Monday, reiterating that he supports interest rate at 3.5% by the year end.

The path outlined by Bullard would require 50 basis point rate hikes at each of the remaining meetings for this year. He said that a 75 basis point rate hike could be an option, if necessary.

Data released by the Commerce Department showed housing starts rose by 0.3% to an annual rate of 1.793 million in March after spiking by 6.5% to a revised rate of 1.788 million in February.

The uptick surprised economists, who had expected housing starts to fall by 1.4% to a rate of 1.745 million from the 1.769 million originally reported for the previous month.

The Commerce Department said building permits also climbed by 0.4% to an annual rate of 1.873 million in March after slumping by 1.6% to a revised rate of 1.865 million in February. Economists had expected building permits to tumble by 1.8% to a rate of 1.825 million from the 1.859 million originally reported for the previous month.

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