Gold futures fall sharply on Fed comments

Gold futures on the COMEX division of the New York Mercantile Exchange fell on Thursday as a U.S. Federal Reserve official hinted at a March rate hike.

The most active gold contract for April delivery fell 17.1 U.S. dollars, or 1.37 percent, to settle at 1,232.90 dollars per ounce.

Comments by Federal Reserve Governor Lael Brainard are the feature of the day, as she told the Kennedy School at Harvard University during a speech after the market's close on Wednesday that a rate hike would come sooner rather than later, possibly during the March Federal Open Market Committee (FOMC) meeting.

Investors now believe the Fed may raise rates from 0.75 to 1.00 during the March FOMC meeting. According to the CME Group' s Fedwatch tool, the current implied probability of a hike from 0.50 to at least 0.75 is at 78 percent at the March meeting and 70 percent for the May meeting, along with a ten percent chance of an increase to a 1.0 rate.

Gold was put under further pressure as the weekly jobless claims report released by the U.S. Department of Labor on Thursday showed initial jobless claims decreasing by 19,000 to a 223,000 level during the week of February 25th. Analysts note that this was much better-than-expected and far better than even the most optimistic estimate.

The U.S. dollar also moved in reaction to the Fed comments, as the U.S. Dollar Index rose by 0.4 percent to 102.18 as of 1915 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.

Silver for May delivery dropped 74.1 cents, or 4.01 percent, to close at 17.748 dollars per ounce. Platinum for April delivery fell 29 dollars, or 2.85 percent, to close at 989.90 dollars per ounce. Endit