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Gold futures settle higher as rate increase expectation descends

Xinhua, June 9, 2016 Adjust font size:

Gold futures on the COMEX division of the New York Mercantile Exchange settled higher on Wednesday as the expectations of FED June interest rate increase descended.

The most active gold contract for August delivery rose 15.30 U.S. dollars, or 1.23 percent, to settle at 1,262.30 dollars per ounce.

Ever since the release of the April Federal Open Market Committee (FOMC) meeting minutes, traders believed that the Fed will keep a June interest rate increase on the table but now that the economy has shown to be less durable, investors now believe that the next rate hike is unlikely to take place before September. According to the CMEGroup's Fedwatch tool, the current implied probability of a hike from 0.50 to 0.75 is at 2 percent for the June meeting, 25 percent at the July 2016 meeting, and 43 percent at the September 2016 meeting.

Federal Reserve Chairwoman Janet Yellen also failed to signal the timing of further interest rate-hikes in her latest speech on Monday.

In her last public speech before the Fed's June policy meeting next week, Yellen said U.S. interest rate-hikes are likely on the way, but did not mention the timing of the hike.

Gold was put under pressure as the U.S. Dollar Index fell by 0.3 to 93.58 as of 18:30 GMT. The index is a measure of the dollar against a basket of major currencies. Gold and the dollar typically move in opposite directions, which means if the dollar goes up, gold futures will fall as gold, measured by the dollar, becomes more expensive for investors.

On the economic front, the U.S. Department of Labor showed Wednesday job openings increasing to 5.788 million, which was better-than-expected.

Traders are still waiting for the weekly jobless claims report due on Thursday, and the consumer sentiment report due on Friday, while carefully weighing the economic reports ahead of the U.S. Federal Reserve's Federal Open Market Committee meeting later this month.

Silver for July delivery added 59.10 cents, or 3.60 percent, to close at 16.985 dollars per ounce. Platinum for July delivery rose 12.60 dollars, or 1.26 percent, to close at 1,012.00 dollars per ounce. Endit