Latest gold and currency rates in the UAE
Gold dropped slightly towards its weakest level in five years earlier this morning after the Federal Reserve said the US economy keeps strengthening, supporting a possible interest rate increase when the Fed meets again in two months.
After a two-day meeting, policymakers stated earlier this week, that they felt the economy had overcome a first-quarter slowdown and was "expanding moderately".
That sustained the greenback against a basket of currencies, making dollar-priced gold more expensive for buyers using other currencies.
Spot gold dropped 0.3% to $1,093.40 an ounce by 0239 GMT (6.39am UAE time). It sank to as low as $1,077 last week, its weakest since February 2010, after a selloff in New York and Shanghai and has since struggled to recover above $1,100.
"We still do think the bearish pressure on gold prices is strong. We don't expect to see any substantial recovery," said Howie Lee, analyst at Phillip Futures in Singapore.
Whether a US rate hike – which would be the first since 2006 – came in September or December was immaterial, said Lee who sees the next major support at $1,000.
"The slide that we've seen last week showed investors were already pricing in the effect of the first rate hike whether it's September or December. What matters is after the first rate hike, how would they conduct the rest of the rate increases."
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