Gold prices dropped to a five-week low during European morning hours on Wednesday, as traders bet on a strong likelihood the Federal Reserve will raise rates at its upcoming policy meeting next week.
Comex Gold futures touched a session low of $1,212.50 a troy ounce, a level not seen since February 3. It was last at $1,213.15 by 8:10AM ET (13:10GMT), down $2.75, or about 0.2%.
Spot Gold was down $2.40 at $1,213.40 per ounce.
Markets dramatically adjusted expectations for U.S. interest rate hikes this year following hawkish comments from several top Fed officials last week, including Chair Janet Yellen.
Futures traders are pricing in around an 82% chance of a hike at the Fed’s March 14-15 meeting, according to Investing.com’s Fed Rate Monitor Tool.
Odds of a second rate hike in September currently stand at about 65%, while a third hike in December is priced in at 53%, aligning market expectations with the Fed’s current forecast for three rate hikes in 2017.
The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar in which it is priced.
Investors are now awaiting Friday’s nonfarm payrolls report for further clues on the likely pace of hikes this year.
Ahead of the government report, payroll processing firm ADP is set to release data on February private sector payrolls at 8:15AM ET (13:15GMT).
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was slightly higher at 101.87 in New York morning trade. It reached a two-month high of 102.27 last week.
Treasury yields were also up, with the U.S. 10-Year bond at around 2.525%.
Also on the Comex, silver futures for May delivery slipped 8.0 cents, or around 0.5%, to $17.45 a troy ounce.
Meanwhile, platinum was down 0.4% to $957.70, while palladium dipped 0.8% to $768.75 an ounce.
Elsewhere in metals trading, copper futures added 0.2 cents, or less than 0.1%, to $2.621 a pound.